Circle IPO Prospectus Interpretation: Analysis of Financial Status, Business Model, and Strategic Intent

On April 1, 2025, Circle Internet Financial submitted an S-1 registration statement to the U.S. Securities and Exchange Commission, planning to go public on the New York Stock Exchange with the stock code "CRCL". As the issuer of the USDC stablecoin, Circle previously attempted to go public via SPAC in 2022 but was unsuccessful, and now it embarks on the path to going public again. This article will delve into Circle's financial status, business model, and listing strategy, exploring the development logic of this stablecoin giant and its potential impact on the cryptocurrency industry.

Part One: Circle's Financial Status

1.1 The contradiction between income growth and profit decline

Circle's financial data shows a situation of both growth and pressure. In 2024, the company's total revenue and reserve income reached $1.676 billion, a year-on-year increase of 16%. However, net income fell from $268 million to $156 million, a decline of 42%. The phenomenon of revenue growth but profit decline is due to complex reasons.

Data shows that revenue growth mainly comes from reserve income, which is projected to be $1.661 billion in 2024, accounting for 99% of total revenue. This is due to the significant increase in the circulation of USDC—by March 2025, the circulation is expected to reach $32 billion, a year-on-year increase of 36%. However, pressures on the cost side cannot be ignored. Distribution and transaction costs rose from $720 million to $1.011 billion, an increase of 40%, while operating expenses also grew from $453 million to $492 million, of which general administrative expenses rose from $100 million to $137 million.

1.2 Composition of Reserve Income

Reserve income is the core source of revenue for Circle, reaching $1.661 billion in 2024, accounting for 99% of total revenue. This portion of income mainly comes from interest earnings on managing USDC reserve assets. USDC is a stablecoin pegged to the US dollar at a 1:1 ratio, with 1 USDC backed by 1 dollar. As of March 2025, a circulation of $32 billion implies an equivalent amount of reserve assets, which are invested in low-risk instruments, including US Treasuries (85% managed by an asset management company) 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 of 5.35%, the annual interest is approximately 1.659 billion USD, which is almost consistent with the actual 1.661 billion USD. However, Circle needs to share this income with a trading platform, which also explains why the net income is relatively low. The stability of this income also depends on the circulation and interest rates; if the Federal Reserve lowers interest rates or if there are fluctuations in USDC demand in the future, it may pose risks.

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% in cash held in top-tier banks, and monthly public reports enhance trust. However, the company's own cash and short-term investment interest income is negative, amounting to -$34.712 million in 2024, possibly affected by management fees. Circle has a solid financial foundation, but the impact of the external environment cannot be ignored.

Part Two: Deconstructing the Circle Business Model

the core position of 2.1 USDC

Circle's business is centered around USDC, which ranks second globally among stablecoins. According to data from various platforms, USDC has a circulation of $60.1 billion and a market share of approximately 26%, second only to another mainstream stablecoin. It is widely used in payments, cross-border transfers (with a market size of $150 trillion), and decentralized finance (DeFi), leveraging blockchain technology to enable fast and low-cost transactions, surpassing traditional cross-border payment systems.

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

2.2 Diversified Attempts

In addition to USDC, Circle is also developing a digital wallet, cross-chain bridges (connecting different blockchains), and its own Layer 2 public blockchain, aiming to enhance 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 technological development may increase the cost burden in the short term.

2.3 Relationship with a certain trading platform

The relationship between Circle and a certain trading platform is quite dramatic. The two once co-founded an alliance to manage USDC. In 2023, Circle acquired shares of the trading platform for $210 million in stock, taking full control of the alliance, but the revenue-sharing agreement continues to this day. The trading platform takes 50% of the reserve income, leading to a distribution cost of as much as $1.011 billion in 2024. This is both a legacy of cooperation and a drag on profits, and whether the revenue sharing will be adjusted in the future is worth paying attention to.

Part Three: Strategic Intent of Listing

3.1 Funding and Expansion

Circle's IPO aims to raise funds, with a net amount tentatively set at X million USD (depending on the issue price), part of which will be used to pay RSU taxes, and the remainder will be invested in operating capital, product development, and potential acquisitions. USDC's market share is only 26%, far below another mainstream stablecoin's 67%. Circle clearly hopes to accelerate its 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 strict. Circle has relocated its headquarters to the U.S. and chosen to go public, actively accepting SEC 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 help Circle win more traditional financial partners.

3.3 Shareholders and Liquidity

The equity structure of Circle is divided into Class A (1 vote/share), Class B (5 votes/share, capped at 30%), and Class C (no voting rights), with the founders retaining 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 means of financing and a balancing act for shareholder returns.

Part Four: Insights into the Cryptocurrency Industry

4.1 Set Industry Benchmark

Circle's IPO has opened up traditional exit paths for crypto companies. In the past, ICOs and private placements were mainstream, but they carried high risks and poor liquidity. Circle has demonstrated the viability of public markets through its IPO, which could enhance confidence among venture capitalists (VCs) and attract more funding into crypto startups, driving industry growth.

4.2 The possibilities of innovative gameplay

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

4.3 Risks and Challenges

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

Conclusion

Circle's IPO showcases its financial strength (1.676 billion in revenue), business ambitions (USDC + diversification), and industry aspirations. Reserve income is its lifeblood, but reliance on revenue 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 the doors of traditional finance to 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.