Circle's freshly filed S-1 registration statement has pulled back the curtain on the economics of the world's second-largest stablecoin — and the numbers tell a striking story. In Q1 2025 alone, Circle paid $461 million in distribution costs, with the lion's share going to Coinbase, its primary distribution partner.
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The filing makes clear that when it comes to capturing the yield generated by USDC reserves, the distributor — not the issuer — holds the leverage.
The S-1 Breakdown
Circle's IPO filing with the U.S. Securities and Exchange Commission reveals that the company generated approximately $1.68 billion in revenue in 2024, predominantly from reserve income — the interest earned on U.S. Treasuries and cash equivalents backing USDC. However, distribution and transaction costs consumed a significant portion of that revenue.
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The $461 million paid out in Q1 2025 represents a sharp acceleration from prior quarters. For the full year of 2024, Circle's distribution expenses totaled roughly $1.01 billion, meaning the first quarter of 2026's fiscal reporting cycle already accounts for nearly half of the prior year's total. The bulk of these payouts flow to Coinbase under a long-standing revenue-sharing agreement tied to USDC distribution.
Coinbase: The Power Behind USDC Distribution
The relationship between Circle and Coinbase dates back to the founding of the Centre Consortium, the original governance body behind USDC. While Circle eventually took full control of USDC issuance, Coinbase retained a revenue-sharing arrangement that entitles it to a substantial cut of the interest income generated by USDC reserves held on or distributed through its platform.
According to the S-1, Coinbase receives a share of revenue proportional to the amount of USDC held on its platform. Given that Coinbase is one of the largest custodians of USDC balances globally, this arrangement translates into hundreds of millions of dollars per quarter flowing from Circle to Coinbase.
"The distribution economics of USDC effectively mean that Coinbase captures a significant portion of the yield, while Circle bears the regulatory, operational, and compliance costs of issuance."
This dynamic has drawn attention from analysts who note that Circle's net income margins are considerably thinner than its top-line revenue might suggest. In 2024, Circle reported a net income of approximately $156 million on $1.68 billion in revenue — a margin of roughly 9.3%.
What This Means for Stablecoin Economics
The filing underscores a broader structural reality in the stablecoin market: distribution is king. Issuers like Circle handle the complex work of maintaining reserves, securing regulatory approvals, and managing redemptions. But the platforms that hold user deposits and facilitate transactions — the distributors — are positioned to extract the most economic value.
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This pattern mirrors traditional finance, where payment networks and banks that sit closest to the end user often capture more margin than the underlying infrastructure providers. In the stablecoin context, exchanges, wallets, and fintech apps that drive USDC adoption wield significant bargaining power.
Circle earns reserve income but pays out the majority in distribution costs
Coinbase captures a large share of USDC yield through its revenue-sharing agreement
Circle's net margin sits around 9.3%, despite generating $1.68B in 2024 revenue
Distribution costs are accelerating, with Q1 2025 nearly matching half of 2024's full-year total
IPO Implications
Circle's planned IPO, which would list the company on the New York Stock Exchange under the ticker CRCL, now carries additional scrutiny. Investors will need to evaluate whether Circle can renegotiate its distribution agreements, diversify its partner base, or find new revenue streams to improve margins as it transitions to a public company.
The company has been expanding USDC's presence across multiple blockchains and into new geographies, moves that could reduce its dependence on any single distribution partner. Circle has also been pushing into cross-border payments and developer infrastructure — areas where it could potentially capture more of the value chain.
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For now, however, the S-1 paints a clear picture: in the stablecoin business, minting the coin is one thing — distributing it is where the real money flows. As the stablecoin market continues to grow and regulatory frameworks like the proposed U.S. stablecoin legislation take shape, the balance of power between issuers and distributors will be one of the most consequential dynamics to watch.
