Circle IPO Prospectus Analysis: Financial Condition, 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 list on the NYSE 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, and is now making another push for an IPO. This article will delve into Circle's financial condition, business model, and strategic intentions, and explore the potential impact of its listing on the cryptocurrency industry.

1. Financial Profile of Circle

1. The contradiction between revenue growth and profit decline

Circle's financial data presents a situation of simultaneous growth and pressure. In 2024, the company's total revenue reached $1.676 billion, a year-on-year increase of 16%. However, net income fell from $268 million to $156 million, a decrease of 42%. Revenue growth was primarily driven by reserve income, which totaled $1.661 billion in 2024, accounting for 99% of total revenue. This was due to a significant increase in the circulation of USDC, which reached $32 billion by March 2025, a year-on-year growth of 36%.

However, the pressure on the cost side cannot be ignored. Distribution and trading costs increased from $720 million to $1.011 billion, a growth of 40%, and operating expenses also rose from $453 million to $492 million. Among them, general administrative expenses increased from $100 million to $137 million. These figures indicate that although Circle's financial growth is impressive, the pressure on profits is also significant.

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 comes from interest earned on 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 means 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 and a government bond yield of 5.35%, the annual interest would be approximately $1.659 billion, which is almost in line with the actual $1.661 billion. It is worth noting that Circle needs to share this income with a trading platform. This revenue-sharing mechanism explains why Circle's net income is relatively low.

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 at top banks, and monthly public reports enhance trust. However, the company's own cash and short-term investment interest income is negative, at -34.712 million USD for 2024, possibly affected by management fees. Circle's financial foundation is solid, but the impact of the external environment cannot be ignored.

2. Deconstruction of Circle's Business Model

1. The Core Position of USDC

Circle's business is centered around USDC, which ranks second globally among stablecoins. According to data from a certain platform, the circulation of USDC is $60.1 billion (which may differ from the $32 billion in S-1 due to time discrepancies), with a market share of approximately 26%, second only to another major stablecoin. USDC is widely used for 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, outperforming traditional payment systems.

The advantages of USDC lie in its compliance and transparency. It complies with the EU MiCA regulations and obtained EMI license in France in July 2024, with monthly reserve reports verified by auditing firms, contrasting with other non-regulated stablecoins. Of its revenue sources, 99% comes from reserve interest ($1.661 billion), while transaction fees and other income amount to only $15.169 million, a negligible share.

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 chain, aiming to enhance the use cases and scalability of USDC. These businesses currently contribute limited revenue, included in the other income of $15.169 million. Nevertheless, they represent future growth potential, although the high investment in technology development may increase the cost burden in the short term.

3. Cooperation relationship with a trading platform

The relationship between Circle and a certain trading platform is quite dramatic. The two jointly founded an organization to manage USDC. In 2023, Circle acquired shares of the platform for $210 million in stock, gaining sole management control, but the revenue-sharing agreement has continued to this day. The platform takes 50% of the reserve income, resulting in a distribution cost of up to $1.011 billion in 2024. This is both a legacy of cooperation and a drag on profits, making any potential adjustments to the revenue sharing worth paying attention to in the future.

3. Strategic Intent of Listing

1. Capital and Expansion

Circle's IPO aims to raise funds, with a net amount tentatively set at X million USD (subject to the issue price), part of which will be used to pay RSU taxes, and the remainder will be invested in working capital, product development, and potential acquisitions. USDC's market share is only 26%, far below the 67% of its main competitors, and Circle clearly hopes to accelerate expansion through funding, such as advancing Layer 2 public chains and global market penetration.

2. Responding to Regulation and Enhancing Reputation

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

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 financing and a balancing act for shareholder returns.

4. Insights for the Cryptocurrency Industry

1. Set industry benchmarks

Circle's IPO has opened up a traditional exit path for crypto companies. In the past, ICOs and private placements were mainstream, but they carried high risks and had poor liquidity. By proving the viability of public markets through its IPO, Circle may enhance the confidence of venture capital (VC) and attract more funds into crypto startups, driving the industry's growth.

2. The possibility of innovative gameplay

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

3. Risks and Challenges

However, the listing is not a smooth path. The recent downturn 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 ambitions, and industry aspirations. Reserve income is its lifeblood, but reliance on revenue sharing and interest rates from a certain trading platform poses risks. If the listing succeeds, Circle could not only solidify its position in the stablecoin market but also potentially open doors to traditional finance 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 anticipating.