Circle IPO Prospectus Interpretation: 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 with the stock code "CRCL". As the issuer of the USDC stablecoin, Circle had previously attempted to go public via SPAC in 2022 but was unsuccessful. Now, they are making another push into the capital markets with more detailed financial data and clear strategic goals. This article will analyze Circle's motivations for going public, its financial status, business model, and potential impact on the cryptocurrency industry.

1. Financial Profile of Circle

1.1 The contradiction between revenue growth and profit decline

Circle's financial data shows a situation of growth coexisting with 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 mainly comes from the increase in reserve revenue, which amounted to $1.661 billion in 2024, accounting for 99% of total revenue. This is attributed to the significant increase in USDC circulation—by March 2025, the circulation reached $32 billion, a year-on-year growth of 36%.

However, the pressure on the cost side cannot be ignored. Distribution and transaction costs increased from $720 million to $1.011 billion, a 40% increase; operating expenses also rose from $453 million to $492 million, of which general administrative expenses increased from $100 million to $137 million. This phenomenon of revenue growth accompanied by declining profits reflects the cost challenges that Circle faces during its expansion.

1.2 Composition of reserve income

Reserve income is the core revenue source for Circle, reaching up to $1.661 billion in 2024, almost accounting for all total revenue. This portion of income mainly comes from the interest generated from managing USDC reserve assets. USDC is a stablecoin pegged to the US dollar at a 1:1 ratio, with each USDC issued backed by one US dollar. As of March 2025, a circulation of $32 billion in USDC implies an equivalent amount of reserve assets. These assets are primarily invested in low-risk instruments, including U.S. Treasury bonds (about 85%, managed by professional asset management companies) and cash (10-20%, held in globally systemically important banks).

Taking 2024 as an example, assuming an average reserve size of 31 billion USD and a government bond yield calculated at 5.35%, the annual interest is approximately 1.659 billion USD, which is basically in line with the actual reported 1.661 billion USD. It is worth noting that Circle needs to share half of this income with its partners, which is also one of the important reasons for the relatively low net income.

1.3 Asset and Liquidity Overview

Circle's asset structure emphasizes liquidity and transparency. 85% of USDC reserves are invested in government bonds, with 10-20% held in cash at top banks, and monthly public reports are released to enhance trust. However, the company's cash and short-term investment interest income is negative, amounting to -$34.712 million in 2024, possibly affected by management fees and other factors. Although specific total asset and liability data have not been fully disclosed in the existing information, the robustness of reserve management is evident. Circle's financial foundation is relatively solid, but the impact of changes in the external environment cannot be ignored.

2. Analysis of Circle's Business Model

the core position of 2.1 USDC

The core business of Circle is USDC, which is the second largest stablecoin in the world. According to the latest data, the circulation of USDC is approximately $60.1 billion, with a market share of around 26%. USDC is widely used in payments, cross-border transfers, and decentralized finance (DeFi), leveraging blockchain technology to achieve fast and low-cost transactions, which have significant advantages over traditional transfer systems.

The main advantages of USDC lie in its compliance and transparency. It complies with relevant EU regulations, received a license from the French electronic money institution in July 2024, and publishes monthly reserve reports verified by an auditing agency. This highly transparent approach contrasts sharply with certain unregulated stablecoins, enhancing trust among users and regulatory bodies.

2.2 Diversification Development Attempts

In addition to USDC, Circle is also developing digital wallets, cross-chain bridges, and its own Layer 2 public chain, aiming to expand the use cases of USDC and improve scalability. Although these businesses currently contribute limited revenue, they represent the company's growth potential in the future. However, the high investment in these technological developments may increase the cost burden in the short term.

2.3 Relationship with Partners

The relationship between Circle and a certain trading platform is quite complex. Both parties once jointly managed USDC, but in 2023, Circle acquired relevant shares of the platform and independently took control of USDC management. However, the revenue-sharing agreement continues, leading to high distribution costs that affect Circle's profit performance. The future direction of this partnership is worth paying attention to.

3. Strategic Intent of the Listing

3.1 Fundraising and Business Expansion

Circle's IPO aims to raise funds to pay for employee incentive plan-related taxes, operational capital investments, product development, and potential acquisitions. Given that USDC still has significant room for growth in the stablecoin market, Circle clearly hopes to use this funding to accelerate market expansion, promote technological innovation, and penetrate global markets.

3.2 Responding to Regulation and Enhancing Credibility

Against the backdrop of increasingly strict regulation of stablecoins in the United States, Circle's decision to go public is a proactive acceptance of regulation. Public financial and reserve data not only meet regulatory requirements but also enhance the trust of institutional investors. This transparency strategy is quite forward-looking in the crypto industry and may help Circle win more traditional financial partners.

3.3 Shareholder Interests and Liquidity

The equity structure design of Circle ensures the control of the founders while providing liquidity for early investors and employees. The IPO is both a means of financing and a measure to balance the interests of various shareholders.

IV. Insights for the Cryptocurrency Industry

4.1 Set industry benchmarks

Circle's IPO has opened up a traditional exit path for crypto companies, demonstrating the viability of public markets. This could enhance venture capital's confidence in the crypto industry, attracting more capital inflow and driving the development of the entire sector.

4.2 Possibilities of Innovative Models

If Circle successfully goes public, it may inspire other crypto companies to follow suit and explore more innovative listing or financing models. These new models may blur the lines between traditional finance and crypto finance, bringing new opportunities for investors.

4.3 Risks and Challenges

However, the listing process is not smooth sailing. The recent poor performance of the tech stock market may affect pricing, and regulatory uncertainty also poses a potential 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 influence. Reserve income is its core advantage, but there are also dependency risks. If the listing is successful, Circle will not only consolidate its position in the stablecoin market but may also open a new chapter for the entire crypto industry in connecting with traditional finance. From compliance to exit strategies, Circle's path to listing is both a display of opportunities and a barometer for industry development.