Stablecoin "First Stock" Is Unstable
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Stablecoin "First Stock" Is Unstable
There are three bad pieces of news about Circle: interest rate cuts, tech giants entering the market, and Coinbase being a致命 threat.
Navigating Web3 tides with focused insightsAuthor: Eastland
Article Summary
Circle, the stablecoin issuer, saw its stock surge 622%, but faces a triple crisis: Fed rate cuts will squeeze its core income from U.S. Treasury interest; partner Coinbase takes over 60% of profits and plans to increase its share; tech giants like Apple may enter the stablecoin market using Treasuries and brand power, threatening Circle's survival.
• 💱 Stablecoin analogy: Functions like a dollar depositary receipt, featuring a two-tier intermediary structure and legal arbitrage, yet defined as a payment tool, not a security.
• 📊 Uneven competition: USDC holds only 25% market share (61 billion USD), far behind USDT’s 62% (150 billion USD), though it has clear regulatory advantages.
• 🏛️ Regulatory value: Global licenses, 100% cash/Treasury reserves, and monthly audits build a regulator-friendly image, crucial for going public.
• ⚖️ Coinbase revenue split: Partner takes fixed 50% of reserve yield; all user deposit yields go to Coinbase; profit-sharing exceeded 60% in 2024.
• 📉 Rate cut impact: 96% of income comes from Treasury interest; each 1% drop in yield costs 600 million USD annually, worsened by Coinbase's growing share.
• 🚨 Threat from giants: Apple, Amazon may launch proprietary stablecoins backed by Treasuries and brand trust, capturing market share and squeezing Circle.
On June 5, 2025, Circle (NYSE: CRCL), the first publicly listed stablecoin company, went public at $31 per share, reaching a peak of $299 within just 12 trading days.
By July 18, it closed at $223.78, up 622% from its IPO price, with a market cap nearing $50 billion. Though the stock has since pulled back 25% from its high, risks remain substantial.
Stablecoin = Fiat Depositary Receipt
A stablecoin is a cryptocurrency pegged to fiat currency—a digital proxy for money. To better understand, consider an analogy: stablecoins are like "depositary receipts" for fiat currencies.
In the U.S., Chinese companies trade via American Depositary Receipts (ADRs). For example, Alibaba ADR represents one ordinary share, Baidu ADR eight shares, Ctrip ADR one share, JD.com ADR two shares…
Stablecoins can be compared to ADRs in four ways:
First, both issue certificates representing asset ownership. ADRs entitle holders to rights such as dividends and voting. Stablecoin issuers issue digital tokens representing ownership of reserve assets (fiat, Treasuries).
Second, both use a “two-tier intermediary structure.” ADRs are issued by depositary banks, while underlying stocks are held by custodian banks. Similarly, stablecoins require collaboration between issuers (e.g., Tether, Circle) and custodians (e.g., BlackRock) for asset backing and token issuance.
Third, both overcome “legal barriers.” Under U.S. law, only domestic firms can list directly. ADRs allow U.S. investors indirect access to foreign equities. Stablecoin users can hold fiat equivalents without opening traditional accounts (USD, EUR, HKD).
Fourth, both rely on pegging mechanisms. ADRs strictly track underlying shares; compliant stablecoins maintain 1:1 reserves.
Despite similarities, ADRs and stablecoins differ fundamentally—ADR is a stock proxy, classified as a security; stablecoin is a currency proxy, classified as money. This distinction is critical. The recently passed U.S. GENIUS Act explicitly defines stablecoins not as securities, commodities, or investments, but as “payment tools.”
The Anti-CBDC Act, passed alongside the GENIUS Act, bans digital currency issuance in the U.S.—a stark contrast to China’s aggressive push for digital RMB (note: digital RMB is fiat itself, not a proxy).
CIRCLE’s Issuance Fluctuations
Founded in 2013 and headquartered in Boston, Circle initially offered Bitcoin payments and cross-border transfers. It raised $26 million in Series A and B rounds; IDG led its 2016 Series D with Goldman Sachs and Baidu participating; Everbright Holdings joined in the 2018 Series E.
Circle’s turning point came in 2018 when it co-launched USDC with Coinbase, establishing transparency through 1:1 dollar reserves and monthly audits—differentiating from USDT.
In 2022, Circle issued and redeemed $167.61 billion and $165.47 billion respectively, net issuance $2.14 billion, ending circulation at $44.55 billion (circulation = issuance – redemptions);
In 2023, issuance and redemption were $95.83 billion and $115.98 billion, net redemption $20.14 billion, ending circulation at $24.41 billion;
In March 2023, Silicon Valley Bank collapsed, freezing $3.3 billion of Circle’s deposits. On March 11, USDC dropped over 12% intraday, hitting a low of $0.878. Although it quickly recovered its peg, user confidence was severely damaged, nearly halving USDC’s year-end circulation;
In Q1 2024, confidence remained weak—issuance and redemption were $32.15 billion and $24.14 billion, net increase of $8 billion in circulation;
In the last three quarters of 2024, USDC truly rebounded, issuing $141.34 billion total, net circulation increase of $19.44 billion to $43.86 billion.
In Q1 2025, issuance and redemption reached $53.22 billion and $37.1 billion, net increase of $16.12 billion, bringing circulation to $60 billion;
From January 1, 2021 to March 31, 2025, total USDC issuance and redemption amounted to $558 billion and $502 billion respectively, exceeding $1 trillion combined.
In June 2025, USDC circulation was approximately $61 billion, holding about 25% market share, ranking second. Tether’s USDT had about $150 billion in circulation and 62% market share.
Beyond most Chinese people’s awareness, stablecoin transaction volume has grown explosively:
In 2024, stablecoin transaction volume reached $15.6 trillion (~110 trillion RMB), surpassing Visa and Mastercard!
Circle’s prospectus reveals that in Q1 2025, total transaction volume hit $6 trillion; cumulative USDC transactions since launch reached $25 trillion (~180 trillion RMB).
In July 2025, USDC and USDT averaged daily (24-hour) transaction volumes of $60 billion and $120 billion respectively. Just these two leaders annualize to $70 trillion (~500 trillion RMB)!
In 2024, China’s bank card transaction volume totaled 992.5 trillion RMB, including 791.7 trillion for transfers, 133.7 trillion for consumption, and 67.1 trillion for cash deposits/withdrawals.
Stablecoin transactions have exploded in the past two years, already matching half of China’s entire bank card volume.
The Obedient “Good Student”
Circle’s scale is only half of Tether’s, yet it entered mainstream capital markets first and was enthusiastically embraced because of its compliance focus and regulator-friendly posture—in simple terms, the “obedient good student.”
Circle’s “obedience” manifests in two main ways:
First, actively obtaining licenses. It now holds payment and digital asset licenses in the U.S., U.K., EU (MiCA certified), Singapore, and other regions;
Second, ensuring transparency. Reserves are 100% cash and short-term U.S. Treasuries, audited monthly by firms like Deloitte (following AICPA standards); users can check reserves online in real time.
Tether uses an offshore model, relocating its headquarters to El Salvador. Worse, its reserves include large amounts of commercial paper, over 60%! On this alone, Tether’s reserve safety cannot compare to Circle’s.
Circle’s USDC is a compliant stablecoin; Tether’s USDT is non-compliant. Currently, non-compliant ones dominate.
The recently passed GENIUS Act requires stablecoins to be fully backed by U.S. dollars and Treasuries, directly benefiting USDC, potentially forcing USDT off U.S. exchanges. Yet across much of the “Global South,” USDT’s non-compliance paradoxically becomes its biggest selling point.
Circle’s “Incomplete” Structure
Coinbase, founded in May 2012, evolved from a trading platform into an ecosystem, generating $3.99 billion in revenue in 2024.
Coinbase is also a “good student,” holding key credentials: U.S. MSB (Money Services Business), FinCEN, CFTC, SEC investment advisor (for crypto assets), and EU MiCA certification—the highest level in the EU.
Coinbase even uses predictive models to anticipate regulatory shifts and participates in policy-making (e.g., the GENIUS stablecoin bill).
While prioritizing compliance, Coinbase suffers from high fees and limited coin selection.
Circle and Coinbase are a “natural pair.” In 2018, they co-founded the Centre Consortium, each holding 50%. Circle handles tech development and reserve management; Coinbase manages distribution.
In August 2023, Circle acquired full ownership of Centre Consortium for $210 million (paid with 4% of Circle’s equity).
Yet the two remain deeply intertwined, bound by an agreement that resembles an “unequal treaty”:
First, reserve income sharing. Coinbase gets a fixed 50% of total reserve income as distribution fees; if users deposit USDC into Coinbase, all income from those reserves goes entirely to Coinbase. In effect: “Mine is mine, and half of yours is also mine.”
Second, issuance rights and trademarks. If Circle defaults (e.g., fails to make payments), Coinbase gains the right to issue USDC!
Third, user incentives. Coinbase rewards users who deposit USDC with “variable yields” (4.1% in 2025).
Fourth, priority protection. During a de-peg event (like in 2023), USDC holders on Coinbase receive priority compensation.
With higher returns and stronger safeguards, Coinbase’s USDC holdings rose from 5% in 2024 to 20%, then to 23% in Q1 2025.
Circle, lacking distribution/trading capabilities and dependent on partners like Coinbase, remains structurally incomplete.
Bad News—Rate Cuts
Over 90% of Circle’s revenue comes from investment returns on reserves, primarily short-term U.S. Treasury interest.
In 2023, reserve income was $1.43 billion, accounting for 98.6% of revenue;
In 2024, reserve income reached $1.66 billion, or 99.1% of revenue;
In Q1 2025, reserve income was $560 million, making up 96.4% of revenue;
USDC circulation roughly equals the assets Circle can earn interest on, so it serves as the denominator for calculating reserve yield.
In 2022, average USDC circulation was $49.86 billion, generating $740 million in income, a 1.5% yield;
In 2023, average circulation dropped to $30.47 billion, yet income rose to $1.43 billion, yielding 4.7%;
In 2024, average circulation slightly recovered to $33.34 billion, income $1.66 billion, yield 5%;
In Q1 2025, average circulation was $54.14 billion, income $560 million, annualized yield 4.2%;
In 2022, U.S. short-term bond yields peaked at 4.7%, yet Circle’s reserve yield was only 1.5%, indicating nearly two-thirds of reserves were non-yielding cash;
In 2023 and 2024, reserve yields closely tracked Treasury yields, meaning most reserves were bonds, with minimal cash kept on hand.
As of end-March 2025, USDC circulation stood at $60 billion. For every 1 percentage point drop in Treasury yields, annual income falls by $600 million.
Bad News—Coinbase Is Killing It
Fed rate cuts are inevitable. Compounding the problem, Coinbase takes home most of the remaining income:
In 2022, Circle’s distribution/trading costs were $290 million, 39% of investment income;
In August 2023, Coinbase began “profit-sharing,” causing distribution/trading costs to spike to $720 million that year—50.3% of investment income. Meanwhile, Circle’s net profit was only $272 million;
In 2024, distribution/trading costs surpassed $1 billion (with $908 million going to Coinbase), taking 60.9% of investment income. Circle’s net profit plummeted to $157 million—its return on working for Coinbase keeps shrinking!
In Q1 2025, distribution/trading costs were $350 million, 62.3% of investment income; net profit was $64.79 million.
Rumors suggest Coinbase plans to raise its share of Circle’s total reserve income from 50% to 70%.
Coinbase has become a noose around Circle’s neck—tightening with every turn. Previously demanding money, now it’s taking lives.
Bad News—Tech Giants Enter
1) The U.S. dislikes stablecoins
The top enemy of fintech innovation is the entrenched interests of traditional finance—true everywhere, throughout history!
Circle’s vision is “frictionless exchange of value,” where “frictionless” directly challenges SWIFT’s “high fees.”
SWIFT (Society for Worldwide Interbank Financial Telecommunication) provides messaging services for cross-border payments, connecting 11,000 financial institutions across 200+ countries. According to the World Bank, SWIFT fees account for 6.01% of remittance amounts—known in the industry as “friction cost.”
Besides exorbitant fees, SWIFT technology—dating back to the 1970s—is severely outdated, still relying on paper documents and obsolete processes, resulting in cross-border settlement delays of 2–5 days.
Stablecoin payments directly undermine SWIFT’s business—how could they not be “hated”?
Beyond that, SWIFT, dominated entirely by Western powers, has become a key instrument of hegemony. After the Russia-Ukraine conflict, the U.S. imposed thousands of sanctions on Russia, with the most effective being Russia’s expulsion from SWIFT—called the “financial nuclear bomb.” By using SWIFT against Russia, the West sends an implicit threat to China.
Just because stablecoin payments can bypass SWIFT, the U.S. fundamentally resists them.
2) The U.S. government’s 180-degree strategic pivot
The U.S. has made a complete turnaround on stablecoins, aiming primarily to boost demand for U.S. Treasuries. This is an open strategy—one that cannot be countered!
The strategy operates on two levels:
First, global dollar holders are incentivized to convert into stablecoins. Safe, convenient, fast, low-cost—just like how Chinese people use mobile payments. Not only Americans, but also users in financially underdeveloped, hyperinflation-prone countries benefit greatly from stablecoins.
Second, stablecoin issuers naturally tend to buy Treasuries. The GENIUS Act mandates dollar cash and Treasury reserves—perfect alignment of interests.
Combined, dollar holders unknowingly become Treasury holders. Beisenthal projects stablecoin supply reaching $3.7 trillion by 2030. Per the GENIUS Act, issuers will hold equivalent dollar cash or U.S. Treasuries.
A popular financial influencer argues stablecoins only boost short-term Treasury demand, which isn’t hard to sell—the real problem is long-term debt (10+ years).
But whether short-term Treasuries are in demand depends on yield:
In 2021, 3-month T-bill yields fluctuated between 0.02% and 0.06%;
In 2022, surged to 4.7%;
In 2023, peaked at 5.4%;
In 2024, fell to 3.36% (rate cut cycle began in September);
On July 11, 2025, reported at 3.79%—95 times the 2021 average!
Hengda would obviously prefer to sell 10-year dollar bonds, but won’t refuse 3-month bills. When facing collapse, it doesn’t matter if it’s 3 months or 30 years—get cash to survive.
For Trump, as long as massive, continuous Treasury sales happen, maturity duration is irrelevant. Besides, who knows who’ll be president in ten years? Issuing long-term debt to benefit others isn’t his style.
Trump pressures the Fed to cut rates, but interest rates aren’t arbitrary. The Fed fears post-cut Treasuries won’t sell, forcing another round of QE (buying bonds itself).
Another argument: Treasury holders selling bonds for stablecoins wouldn’t create new Treasury demand. But why would someone give up interest for liquidity? Converting to stablecoins means forfeiting interest (which becomes issuer revenue)—what’s the point?
The previously widespread “Mar-a-Lago Plan” aimed to coerce countries holding U.S. debt into buying 100-year zero-coupon “century bonds” via tariffs and other means.
But even Japan, the most likely “victim,” refused—rendering the “Mar-a-Lago Plan” defunct.
Now, Beisenthal’s strategy is dubbed the “Pennsylvania Plan,” named after Pennsylvania Avenue, home of the U.S. Treasury.
The “Pennsylvania Plan” aims to solve America’s debt issues via stablecoins, but the main players may not be Circle (or Tether), but tech giants like Apple and Amazon (e.g., AppleUSD, AmazonCoin).
U.S. tech giants, with global credibility and solid underlying assets (short-term Treasuries), could capture most stablecoin market share—terrible news for Circle. Meanwhile, mavericks like Tether may face less disruption.
Another possibility—giants like Apple, under Trump’s pressure or incentives, might use part of their massive cash reserves to purchase their own stablecoins.
In summary, Circle faces three bad news items: rate cuts, tech giants entering, and Coinbase squeezing life out of it.
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