Circle Submits IPO Prospectus: Analysis of Financial Condition, Business Model, and Strategic Intent

On April 1, 2025, Circle Internet Financial submitted its S-1 registration statement to the U.S. Securities and Exchange Commission, planning to list on the New York Stock Exchange under the ticker "CRCL". As the issuer of the USDC stablecoin, Circle had previously attempted to go public via SPAC in 2022 but was unsuccessful. Now, it is returning to the public market with more detailed financial data and clear strategic goals. This article will delve into Circle's motivations for going public, its financial condition, business model, and the potential impact on the cryptocurrency industry.

1. Circle's Financial Status

1.1 Revenue growth and profit pressure coexist

Circle's financial data presents a scenario of both growth and pressure. In 2024, the company's total revenue and reserve revenue reached $1.676 billion, an increase of 16% compared to $1.450 billion in 2023. However, net income dropped from $268 million to $156 million, a decline of 42%.

The revenue growth is mainly driven by reserve income, which is expected to reach $1.661 billion in 2024, accounting for 99% of total revenue. This is attributed to the significant increase in USDC circulation - as of March 2025, the circulation has reached $32 billion, a year-on-year increase of 36%. However, cost pressures cannot be ignored, as distribution and transaction costs have risen from $720 million to $1.011 billion, an increase of 40%; operating expenses have also increased from $453 million to $492 million, with general administrative expenses rising from $100 million to $137 million.

1.2 Composition of reserve income

Reserve income is the core revenue source for Circle, reaching 1.661 billion dollars in 2024, accounting for 99% of total revenue. This portion of income comes from the interest earned on the management of USDC reserve assets. USDC is a stablecoin pegged to the US dollar at a 1:1 ratio, meaning that for every USDC issued, there is 1 dollar backing it. As of March 2025, a circulation of 32 billion dollars indicates an equivalent amount of reserve assets, which are invested in low-risk instruments, including U.S. Treasury bonds (85% managed by a certain asset management company's CircleReserveFund) and cash (10-20% held in globally systemically important banks).

For example, in 2024, assuming an average reserve size of 31 billion USD and a government bond yield of 5.35%, the annual interest would be approximately 1.659 billion USD, which is basically consistent with the actual 1.661 billion USD. It is worth noting that Circle needs to share this income with a trading platform, retaining only half of it. This explains why the net income is relatively low. In addition, the stability of reserve income also depends on circulation and interest rates; if there are interest rate cuts or fluctuations in USDC demand in the future, it could pose risks.

1.3 Asset and Liquidity Status

Circle's asset structure emphasizes liquidity and transparency. 85% of the USDC reserves are invested in government bonds, with 10-20% in cash held in top-tier banks, and monthly reports are published to enhance trust. However, the company's own cash and short-term investment interest income is negative, amounting to -34.712 million USD in 2024, possibly influenced by management fees. Although specific data on total assets and liabilities has not been fully disclosed, the robustness of reserve management is evident.

2. Circle's Business Model

the core position of 2.1 USDC

Circle's business is centered around USDC, which is the second-ranked stablecoin globally. According to statistics from a certain data platform, the circulation of USDC is 60.1 billion USD, with a market share of about 26%, second only to a certain stablecoin. USDC is widely used in payments, cross-border transfers (market size of 150 trillion USD), and decentralized finance (DeFi), leveraging blockchain technology to enable fast and low-cost transactions, superior to traditional cross-border payment systems.

The advantages of USDC lie in its compliance and transparency. It complies with the EU MiCA regulation, obtained French EMI license in July 2024, and monthly reserve reports are verified by auditing firms. Of the revenue sources, 99% comes from reserve interest (1.661 billion USD), while transaction fees and other income are only 15.169 million USD, accounting for a negligible proportion.

2.2 Diversified Business Layout

In addition to USDC, Circle is also developing a digital wallet, cross-chain bridge, and self-developed Layer 2 public chain, aiming to expand the use cases and scalability of USDC. These businesses currently contribute limited revenue, included in the $15.169 million of other income. Nevertheless, they represent future growth potential, but the high investment in technology development may increase the cost burden in the short term.

2.3 Cooperation with a certain trading platform

The relationship between Circle and a certain trading platform is quite dramatic. The two jointly founded the institution that manages USDC, and in 2023, Circle acquired a stake in the platform for $210 million in stock, independently managing USDC, but the revenue-sharing agreement continues to this day. The platform takes 50% of the reserve income, leading to distribution costs reaching $1.011 billion in 2024. This is both a legacy of cooperation and a burden on profits, making any potential adjustments to the revenue sharing in the future worth paying attention to.

III. Strategic Intent of the Listing

3.1 Fundraising and Business Expansion

Circle's IPO aims to raise funds, the net amount will be determined based on the offering price, with part used to pay RSU taxes and the remainder invested in working capital, product development, and potential acquisitions. USDC's market share is only 26%, far lower than a competitor's 67%. Circle clearly hopes to accelerate expansion through funding, such as advancing Layer 2 public chains and global market penetration.

3.2 Responding to Regulation and Enhancing Reputation

The regulation of stablecoins in the United States is becoming increasingly stringent. Circle has moved its headquarters to the U.S. and chosen to go public, proactively accepting the SEC's disclosure requirements. Public financial and reserve data not only meets regulatory expectations but also enhances institutional trust. This transparency strategy is quite clever in the crypto industry and may win Circle more traditional financial partners.

3.3 Shareholders' Equity and Liquidity

The equity structure of Circle is divided into Class A (1 vote/share), Class B (5 votes/share, with a cap of 30%), and Class C (non-voting). The founders retain control. The IPO will also provide liquidity for early investors and employees, and secondary market trading (valued at $4-5 billion) has shown demand. The IPO is both a financing move and a balancing act for shareholder returns.

4. Implications for the Cryptocurrency Industry

4.1 Establish industry benchmarks

Circle's IPO has opened up traditional exit routes for crypto companies. In the past, ICOs and private placements were the mainstream, but they carried high risks and low liquidity. Circle's IPO has demonstrated the viability of public markets, which may boost venture capital confidence and attract more funding into crypto startups, driving industry growth.

4.2 Possibilities of Innovative Models

If Circle succeeds, other companies may follow suit, such as quickly entering the market via SPAC or direct listings. Stock tokenization, trading on the blockchain, or integration with DeFi (such as for lending or staking) are all potential new models. These innovations may blur the lines between traditional and crypto finance, bringing new opportunities for investors.

4.3 Risks and Challenges

However, the listing is not smooth sailing. The recent slump in the tech stock market (the worst quarter for Nasdaq since 2022) may depress pricing, and regulatory uncertainty (such as tightening stablecoin legislation) also poses a threat. Circle's success or failure will test the adaptability of crypto companies in traditional markets.

Conclusion

Circle's IPO showcases its financial strength, business ambition, and industry aspirations. Reserve income is its lifeblood, but reliance on profit-sharing and interest rates with a certain trading platform poses risks. If the listing is successful, Circle could not only solidify its position in the stablecoin market but also potentially open traditional financial doors for the crypto industry, bringing capital and technological innovation. From compliance to exit strategies, Circle's story is both a display of opportunities and a reminder of risks. At the intersection of crypto and traditional finance, its next steps are worth looking forward to.