Circle IPO Prospectus Interpretation: Financial Performance, Business Model, and Strategic Layout

In early April 2025, Circle Internet Financial submitted an S-1 registration statement to the U.S. Securities and Exchange Commission, planning to list on the New York Stock Exchange under the ticker symbol "CRCL". As the issuer of the USDC stablecoin, Circle's intention for this listing is clear, with more transparent financial data and a clearer strategic vision. This article will delve into Circle's financial condition, business model, and its potential impact on the cryptocurrency industry.

1. Financial Overview of Circle

1.1 Revenue growth and profit pressure coexist

In 2024, Circle's total revenue reached $1.676 billion, an increase of 16% compared to $1.450 billion in 2023. However, net income fell from $268 million to $156 million, a decline of 42%. Revenue growth primarily came from reserve income, which amounted to $1.661 billion in 2024, accounting for 99% of total revenue. The circulation of USDC significantly increased, reaching $32 billion by March 2025, a year-on-year growth of 36%.

In terms of costs, distribution and transaction costs increased from $720 million to $1.011 billion, a growth of 40%. Operating expenses also rose from $453 million to $492 million, with general administrative expenses increasing from $100 million to $137 million. This increase in costs has compressed the company's profit margins.

1.2 Composition of Reserve Income

Reserve income is the core revenue source for Circle, primarily derived from interest earnings on the management of USDC reserve assets. USDC is pegged to the US dollar at a 1:1 ratio, with 1 USDC backed by 1 US dollar for every issuance. As of March 2025, a circulating supply of 32 billion USDC implies an equivalent amount of reserve assets. These assets are mainly invested in low-risk instruments, including U.S. Treasury securities (85% managed by a certain asset management company's CircleReserveFund) and cash (10-20% held in globally systemically important banks).

Taking the year 2024 as an example, assuming an average reserve size of 31 billion USD, the yield on government bonds is about 5.35%, and the annual interest is approximately 1.659 billion USD, which is basically in line with the actual 1.661 billion USD. It is worth noting that Circle needs to share this income with a trading platform, which is also one of the reasons for the relatively low net income.

1.3 Asset and Liquidity Status

The asset structure of Circle emphasizes liquidity and transparency. 85% of USDC reserves are invested in government bonds, with 10-20% in cash, held in top banks, and monthly reports are publicly disclosed to enhance trust. However, the company's own cash and short-term investment interest income is negative, with a forecast of -34.712 million USD in 2024, potentially affected by management fees. Although specific total asset and liability data has not been fully disclosed, the robustness of reserve management is evident.

II. Analysis of Circle's Business Model

the core position of 2.1 USDC

USDC is the core of Circle's business and the second largest stablecoin globally. According to statistics from a data platform, the circulation of USDC is $60.1 billion, with a market share of about 26%. USDC is widely used in payments, cross-border transfers, and decentralized finance, utilizing blockchain technology to achieve fast and low-cost transactions.

The main advantages of USDC are compliance and transparency. It complies with the EU MiCA regulations and obtained the French EMI license in July 2024, with monthly reserve reports verified by an auditing firm. In Circle's revenue structure, 99% comes from reserve interest, while only 1% comes from transaction fees and other revenue.

2.2 Business Diversification Attempt

In addition to USDC, Circle is also developing a digital wallet, cross-chain bridge, and its own Layer 2 public chain, aiming to expand the use cases and scalability of USDC. These businesses currently have limited revenue contributions but represent future growth potential.

2.3 Cooperation relationship with a certain trading platform

The relationship between Circle and a certain trading platform is quite complex. The two jointly founded the organization that manages USDC, and in 2023, Circle acquired shares of the platform for $210 million in stock, taking over the independent management of USDC, but the revenue-sharing agreement continues. This collaboration is both a legacy of the past and a primary source of profit pressure currently.

3. Strategic Intent of the Listing

3.1 Financing and Expansion

Circle plans to raise funds through an IPO to pay taxes, operational capital, product development, and potential acquisitions. The market share of USDC is only 26%, far below a certain competitor's 67%. Circle hopes to accelerate expansion through funding, advancing Layer 2 public chains and global market penetration.

3.2 Responding to Regulation and Enhancing Credibility

In response to increasingly strict regulations on stablecoins, Circle has chosen to relocate its headquarters to the United States and go public, proactively accepting the SEC's disclosure requirements. Public financial and reserve data not only meet regulatory expectations but also enhance institutional trust, potentially allowing Circle to gain more traditional financial partners.

3.3 Shareholder Liquidity

Circle's equity structure includes Class A, Class B, and Class C shares, with the founders retaining control. The IPO will provide liquidity for early investors and employees, and secondary market trading has shown high demand.

IV. Insights for the Cryptocurrency Industry

4.1 Set industry benchmarks

Circle's IPO has opened up traditional exit paths for crypto companies, potentially boosting venture capital confidence, attracting more funding into crypto startups, and driving industry growth.

4.2 Possibilities of Innovative Models

The success of Circle may inspire other companies to follow suit, such as quickly entering the market through SPACs or direct listings. Innovative models like stock tokenization, blockchain trading, or integration with DeFi may emerge, blurring the lines between traditional and crypto finance.

4.3 Risks and Challenges

However, the listing is not smooth sailing. The recent downturn in the tech stock market may affect pricing, and regulatory uncertainty also poses a threat. The success or failure of Circle 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 at its core, but there are risks associated with revenue sharing and interest rate dependence. If the listing succeeds, Circle could not only solidify its position in the stablecoin market but also potentially open the doors of traditional finance for the crypto industry, bringing capital and technological innovation. From compliance to exit paths, Circle's development is both a display of opportunities and a reminder of risks, making its future development worth paying attention to.