On its first financial report night after its listing, Circle delivered a complex answer sheet of "book loss and operating growth".

Total revenue and reserve income in the second quarter were $658 million, a 53% year-over-year increase, and adjusted EBITDA was $126 million, a 52% year-over-year increase. Meanwhile, USDC continued to expand in circulation, reaching $61.3 billion in outstanding shares at the end of the period, representing a 28% share of the stablecoin market. However, due to two non-cash items, namely, the significant share-based compensation triggered by the IPO and the change in fair value of convertible bonds, totaling $591 million, the company recorded a net loss of $482 million.

Beyond earnings reports, the industry's competitive landscape has been rapidly rewritten this summer. The GENIUS Act has officially been enacted, highlighting the distinction between "bank-issued stablecoins" and "licensed non-bank issuers." Circle Chief Strategy Officer Dante Disparte stated in a recent interview that the real competition has only just begun, and whether banks will rush into issuing stablecoins remains uncertain.

Circle's collaborations are also expanding.

During the conference call, management highlighted deepening collaborations with major exchanges like Binance and OKX, as well as integrations with payment networks like Stripe, Visa, and Mastercard, and banking infrastructure providers like Fiserv. Meanwhile, rising USDC balances on the Coinbase platform and new distribution agreements also drove up distribution-related costs this quarter. These structural tensions between growth, revenue sharing, and costs are shaping USDC's business model and ecosystem distribution path.

At the same time, Circle also announced Arc, its proprietary blockchain for stablecoin finance. Using USDC as its native gas, it strives for ultra-fast settlement speeds and low-volatility fees. It also introduces optional privacy and compliant, auditable disclosure mechanisms for institutional use cases. This is seen as a key step in the company's transition from a "single issuer" to a "full-stack platform."

Last night, Circle CEO Jeremy Allaire answered several of the most pressing questions during an earnings call and a live interview with The Information:

Why is there a paper loss despite high growth?

The future competitive relationship between bank and non-bank stablecoins under the context of the Genius Act;

"Gambling-style cooperation" with exchanges and the layout of new partners;

Are you considering applying for a license in Hong Kong?

Arc Chain’s strategic goals and industry niche

Beating has compiled the key questions and answers to help readers quickly and accurately understand Circle management's views on the industry and the company's plans (for the full text of the call, please see "Circle 2025 Q2 Earnings Call Full Text" below):

Management plans to increase revenue streams through subscription fees, service fees, and transaction fees

1. Circle's revenue grew 53% year-over-year in the second quarter of this year, but interest on reserves still accounts for the majority of its revenue. How can the company reduce its reliance on these funds?

Jeremy Allaire: Our goal is to build the world's largest, regulated stablecoin network. We're still in the early stages. Whether the stablecoin market grows at a 90% or 25% compound annual growth rate, the inflow will be huge, and we hope to continue to expand USDC's share.

In the past, the company primarily monetized its USDC holdings and relied on partners to drive distribution. However, since last year, we have launched new products at the protocol layer, blockchain infrastructure, developer tools (such as Circle Wallets), and application layer (such as Circle Payments Network (CPN)). This quarter, related revenue grew 250% year-over-year.

Next, we will introduce higher-margin models such as subscription fees, service fees, and transaction fees, and have communicated to Wall Street that these revenues may be quite substantial in the next few years.

Adjusted EBITDA increased 52% year-over-year, with a profit margin of 50%. RLDC profit margin increased by over 200 basis points year-over-year this quarter, largely driven by growth in new businesses. We are building a full-stack ecosystem, from infrastructure and stablecoin layers to payment networks and developer tools. These systems will operate collaboratively and form multiple monetization channels, which are essential for driving the development of the internet financial system.

2. USDC circulation reached $61 billion in Q2. Where does this growth drive come from? What are the future growth opportunities?

Jeremy Allaire: The recent growth reflects a global market's "green light" on stablecoins. This is not only due to the active digital asset market, but also demonstrates that stablecoins are now considered a viable digital cash tool. With a year-on-year growth of 90% and a year-to-date increase of 49%, there is enormous room for future growth.

Stablecoin growth is largely a product of economic activity. The digital asset market is a starting point, but interest is accelerating across various segments of financial services, with potential to last for decades. Third-party CAGR estimates range from 25% to 90%, while our internal model benchmark is 40%, which still delivers impressive returns in an uncertain environment.

3. How do you view the adoption of USDC in cross-border remittances?

Jeremy Allaire: Demand for cross-border remittances is growing, encompassing both consumer-to-consumer (C2C) transfers and business-to-business (B2B) treasury flows. This quarter, we expanded our partnerships with Remitly, MoneyGram, and ZEPS, among others. Cross-border remittances are a primary use case for our CPN.

USDC's advantage lies in its multi-year development of a global liquidity network and deposit/withdrawal system, encompassing key nodes like banks and payment providers, enabling low-cost settlement between fiat currencies, digital currencies, and bank accounts. This network effect and delivery capability are difficult to replicate, and simply issuing a new coin will not solve the problem of cross-border settlement endpoints.

4. Where does the $5.9 trillion in on-chain transaction volume announced in the financial report come from?

Jeremy Allaire: USDC on-chain transactions are widespread across the globe, from Europe and the US to emerging markets and developing countries. P2P payments are particularly popular in financial super-apps. These transactions include inter-exchange fund transfers, as well as savings, investments, payments, and other diverse uses.

Foxkeen (CFO): On-chain transaction volume covers almost all financial service use cases, from C2B and B2B payments to cross-border settlements. Compared with traditional systems, this is the first universal Internet architecture for capital flow. Therefore, different scenarios are intertwined on the chain and difficult to accurately separate.

5. In order to create a "winner takes all" market, will Circle accept higher distribution costs in exchange for growth?

Jeremy Allaire: We are open to collaborating with organizations that drive network growth. The structure of these partnerships varies depending on the type of partner, and it's not simply about transferring reserve earnings. The key is a win-win, growth-oriented approach that can deliver tangible results in terms of transaction speed, market share, and USDC holdings.

Three factors will support RLDC's long-term profit margins: first, the strengthening of network effects will drive growth in both internal and external USDC holdings; second, the increase in USDC holdings on our platform will enable a more flexible economic model; and third, the high-margin value-added services driven by new products will monetize the capital flow within the network. These three factors combined will steadily increase profit margins.

Actively connect with "To Bank" partners and gradually get rid of "exchange dependence"

1. Your revenue-sharing agreement with Coinbase has drawn considerable attention. Will this proportion decrease in the future?

Jeremy Allaire: This quarter, USDC on the Circle platform increased nearly 10 times year-on-year, accounting for approximately 10% of the total circulation, indicating that more and more companies are building their businesses directly based on our infrastructure (such as Circle Wallets and Circle Mint).

These platform partnerships give us greater flexibility in designing our economic relationships and help reduce our reliance on a single distribution partner. If, in the future, the majority of our business runs on our own technology stack, our revenue distribution structure with platforms like Coinbase will gradually reshape.

Our goal is to expand the overall size of the stablecoin "cake" and attract more participants from different fields, including banks, payment companies, capital market institutions and Internet companies.

Coinbase has played a huge role in promoting USDC, but now the new regulatory environment is prompting more traditional institutions to enter, and this diversification will significantly accelerate network growth.

2. How is the cooperation with OKX different from that with other exchanges?

Jeremy Allaire: The digital asset market is crucial to us. Since the beginning of 2024, our share of spot market trading on major exchanges has increased tenfold. OKX has 60 million users, and this partnership will allow them to access Circle Wallet and Circle Mint core infrastructure, providing institutional clients with enhanced USDC liquidity. OKX is already compliant in Europe and plans to enter the US market, which will further expand the reach and use of USDC.

3. Why did Circle and Binance expand their collaboration to USYC?

Jeremy Allaire: Binance has deeply integrated Circle Wallet technology to drive USDC adoption. On USYC, we see tremendous potential in combining yield-generating collateral with USDC cash. Institutional clients and large trading firms want to use yield-generating collateral on exchanges while maintaining liquidity.

The USYC + USDC combination allows for seamless switching between cash and collateral assets 24/7. We believe this is the future of financial markets. Our pioneering implementation with the world's largest exchange will help expand this model to more exchanges and traditional clearing houses.

4. Is the relationship between CPN and networks like Coinbase Commerce complementary or competitive?

Jeremy Allaire: USDC is a market-neutral infrastructure that capital markets firms, exchanges, neobanks, traditional banks, payment providers, and even Visa and Mastercard are building on top of. We are taking a "big tent" approach, hoping that all types of networks can succeed together.

Shopify's enabling of USDC payments and use of Coinbase products is a good example: regardless of whether users have Binance, NewBank or other wallets, they can spend directly at merchants, which enhances the practicality and network value of USDC.

We have recently partnered with companies like Fiserv, FIS, CorePay, and Matera, which provide core payment infrastructure to tens of thousands of banks, to bring USDC to a wider payment ecosystem. CPN is our key on-chain payment network, designed for general use cases, particularly for financial institutions and their clients.

After the Genius Act, the competition with big banks has just begun

1. Does USDC’s growth directly benefit from the Genius Act?

Jeremy Allaire: It's difficult to directly attribute the growth of the past month and a half to the legislation, but the increased global awareness of USDC and its improved alignment with the bill's objectives have led more institutions to believe that it's now time to participate, build, and collaborate. Signals of looser regulations in the US have also fueled interest.

The combination of IPOs and legislation has significantly expanded the business opportunity set. Our focus is on building the right products for these opportunities and fostering win-win economic relationships. The GENIUS Act was a significant catalyst for the interest of large financial institutions. While it takes time for top institutions to engage and deploy, the upside is that this deep integration creates long-term engagement.

2. After the GENIUS Act is officially implemented, what is the biggest concern of management?

Jeremy Allaire: The passage of the legislation and our IPO have brought us a flood of partnership interest from leading global financial institutions, internet companies, and large enterprises. The biggest challenge is prioritizing and seizing these opportunities: Are we building the right products for each market segment? Can we address the needs without being diluted? This is the trade-off my team and I must make.

3. After the bill was enacted, major banks also seem willing to issue their own stablecoins. How do you view the competition with them?

Jeremy Allaire: We view banks as important potential partners. We are already working with regional banks, global systemically important banks, and community banking networks. This quarter, we also announced partnerships with core banking infrastructure providers like Fiserv, FIS, and Matera, which serve tens of thousands of banks. Banks of all sizes can benefit, and we are committed to fostering these partnerships.

4. Will Circle apply for a stablecoin license in Hong Kong?

Jeremy Allaire: Asia is a key market for us. We already have direct institutional-grade USDC liquidity in Hong Kong, partnering with a global systemically important bank. Hong Kong is one of the earliest CPN launch corridors, and cross-border trade is crucial. We are familiar with the local regulatory framework and will consider it within our broader growth strategy.

Circle launches Arc Chain, building its own technology stack

1. Circle announced its self-developed blockchain Arc today. There are already many public blockchains on the market. Why build your own?

Jeremy Allaire: Circle is a market-neutral company. The USDC protocol runs on 24 public chains, CCTP enables seamless cross-chain transactions, and developer tools support multi-chain applications. However, we've found that mainstream institutions still face barriers to adoption of stablecoin finance.

Arc is an open blockchain designed specifically for stablecoin finance, focusing on scenarios such as payment, foreign exchange, and capital markets, and is not a general-purpose platform.

All Arc transactions and gas fees are settled in USDC, and other stablecoins issued on Arc will also be accepted as payment in the future. This predictable, cash-equivalent payment makes it more readily accepted by financial institutions and public companies. Arc also provides instant settlement finality, meeting banking regulatory requirements, and includes optional privacy features.

2. Will Arc’s gas fees become a new source of income for USDC?

Jeremy Allaire: Yes. Arc is designed to carry the core transaction flow of stablecoin finance, and gas fees are one of the new revenue models.

We already have multiple sources of transaction fees, including CPN scaled transactions, Circle Mint advanced features, USYC revenue tokens, etc. Arc's charging model will complement these revenues.

4. How does Arc keep fees low and ensure validator distribution?

Jeremy Allaire: Arc utilizes a novel fee mechanism to ensure low and predictable transaction costs, paid in USDC. Validators will be operated by audited professional nodes, meeting security and compliance requirements, and globally distributed among major institutions. We are currently developing a market expansion plan, with preliminary designs available in the white paper.

5. What will be the future development relationship between Arc and CPN (Circle Payments Network)?

Jeremy Allaire: CPN is currently in the pilot phase and has opened four cross-border payment channels in Hong Kong, Brazil, Nigeria and Mexico. By the end of the year, it will be significantly expanded to major developed markets and more emerging markets, and liquidity guarantees will be enhanced.

Arc will become a key underlying support for the CPN, featuring a built-in foreign exchange engine, configurable privacy and confidential transfers, and direct inter-institutional fund flows. We anticipate that a significant number of financial institutions integrated with the CPN will leverage Arc for their payment and settlement infrastructure.

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