Circle appears set to become the second-largest pure-play crypto firm to go public in the U.S., after filing a prospectus with the SEC on Tuesday. The move marks a tremendous step forward for the firm, which had canceled a previous attempt at a public listing through a SPAC merger during the last bull market, as the country’s regulatory freeze begins to thaw under the crypto-friendly Trump administration. 

While the filing lays the groundwork for its much-anticipated IPO, it has also given industry observers the opportunity to examine the stablecoin issuer’s books, with some raising questions as to why the firm hasn’t been nearly as profitable as its offshore rival Tether. 

According to Circle’s Form S-1, the company's net income was just $155.7 million, down 42% from $267.6 million in 2023. This decline contrasts with a net loss of $768.8 million in 2022 during the marketwide downturn. Tether, on the other hand, recorded record profits of $13 billion in 2024, with over 50% derived from U.S. Treasury yield.

According to Kevin Lehtiniitty, the CEO of Borderless.xyz, who helped develop the first U.S.-based, fully reserved stablecoin, TrueUSD, Circle’s shrinking profits last year may reflect increased operational costs for a firm pursuing a regulatory compliance strategy. 

"Comparing Circle's headcount — Tether has taken the much more permissionless crypto native approach to building," a highly skeptical Lehtiniitty told The Block in an interview. "They don't have any of the costs — whether it's direct licensing costs or indirect licensing costs in the sense of staffing, payroll and things like lobbying — that Circle spends a ton of money on."

Ultimately, Lehtiniitty said, this is all Circle’s cost of "distribution."

According to its filing, Circle paid $908 million to Coinbase, its primary distribution partner, in 2024 to facilitate USDC circulation on the exchange. This significant outlay underscores the cost of maintaining market presence, he added. 

"That's the cost of distribution to be number two, not even the cost of distribution to be number one," Lehtiniitty said. "It’s a great word of caution to anybody who's now looking to launch their own stablecoin."

Lehtiniitty has been in the stablecoin business for nearly a decade, longer than Circle has issued USDC. Borderless is a "picks and shovels" type of business that acts as a global stablecoin orchestration and liquidity network to help global firms integrate stablecoins.

As he sees it, despite Circle’s close working relationship with Coinbase (the two firms collaborated to launch USDC by co-creating the since dissolved CENTRE Consortium), the second-largest stablecoin doesn’t have a "unique advantage" when it comes to distribution. USDC is a stablecoin that can be outcompete. 

"PayPal is a great example here, right? PayPal has a massively unfair advantage when it comes to the distribution of PYUSD if they integrate it very deeply into PayPal's products," he said. "World Liberty would have to prove this, but they probably have a very unique advantage to distribution. I would imagine being the president gives you some advantage in an uptake."

Given that stablecoins are a "commoditized product" with relatively simple underlying technology, Lehtiniitty argues that Circle's only way to compete is by creating regulatory policies that push competitors out. "Creating regulatory policies that are self-serving is certainly a solvable problem," he said. 

"Look at how big an industry lobbying is in our country. But it is an incredibly capex-heavy ordeal. And Circle is going to have to continue spending absolutely ridiculous amounts of money," added Lehtiniitty. 

Circle’s filing comes at a time of rapid regulatory and legislative progress for stablecoins in the U.S., after years of inactivity. President Trump, for instance, has said he is looking to sign a stablecoin bill into law by the end of the summer. The so-called GENIUS Act recently passed the House and will be worked on alongside an analogous bill drafted by the Senate.

Lehtiniitty, who sometimes calls himself the "cranky old man of stablecoins," is uncharacteristically bullish on these bills. "These stablecoin bills have been extremely well thought out, pretty measured and generally very positive — especially from the consumer protection standpoint," he said. 

In particular, Lehtiniitty praised the work done creating a framework where individual states can oversee smaller stablecoins that then graduate to national oversight through the Office of the Comptroller of the Currency once they reach a certain size. 

"Having small market cap stablecoins use state-level licensing, like MTLs [money transmitter licenses], is going to allow for a lot of startup experimentation and innovation to develop," Lehtiniitty said. "But then, allowing the larger market cap stablecoins to operate under an OCC regulation framework is going to give them the ability to have national regulatory clarity, which is missing in the state MTL regimes."

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.

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