Circle's USDC earnings are a bet on US interest rates
Circle Internet Group recently disclosed its financial results for the second quarter of 2026, revealing a business model that functions more like a fixed-income portfolio than a traditional payments processor. While the company’s USDC stablecoin facilitated a staggering $14.8 trillion in on-chain transaction volume during the period, the vast majority of its financial gains were derived from the interest earned on its reserves. According to the figures released in early August 2026, Circle generated $701.3 million in total revenue and reserve income, with approximately 95% of that figure—roughly $667.7 million—coming from interest on the assets backing the stablecoin.
Revenue and Reserve Income
The reliance on interest income highlights a significant disparity between the scale of USDC usage and the direct fees collected from those activities. Despite the trillions of dollars in volume moving across blockchains, transaction-related revenue amounted to just $5.3 million for the quarter. The company’s reserves, which are primarily held in US Treasuries and cash equivalents, saw yields of approximately 3.5%. This financial structure effectively ties Circle’s profitability to the US interest rate curve, making the company’s bottom line highly sensitive to the monetary policy decisions of the Federal Reserve.
Usdc in Circulation
As of June 30, 2026, the total amount of USDC in circulation reached $73.3 billion, representing a 19% increase compared to the previous year. This growth in the supply of the stablecoin has been essential for maintaining revenue levels as interest rates fluctuate. By increasing the total balance of the reserves, Circle has managed to keep its reserve income on an upward trajectory even as yields cooled toward the 3.5% mark. However, the company faces a challenge: if the central bank implements a full percentage point cut to interest rates, a double-digit portion of the quarterly revenue base could vanish unless circulation grows fast enough to compensate for the lower yields.
NET Income and Adjusted Ebitda
For the second quarter of 2026, Circle reported a net income of $48 million. The company’s adjusted EBITDA stood at $143 million, which is an 8% increase over the prior year, while total revenue grew by 7% year over year. These figures underscore the reality that interest earnings are the primary engine of the business. To diversify its income streams, the firm is looking toward the Circle Payments Network. This initiative reported $14.7 billion in annualized volume and serves 175 institutions, marking a 76% increase from the previous quarter.
Circle National Trust Charters
In addition to its payment network, Circle has obtained approvals for its Circle National Trust and New York Trust charters. These regulatory milestones are intended to attract institutional partners that require a chartered counterparty to manage their balances. While these efforts provide a potential hedge against falling interest rates, they currently remain small relative to the massive income generated by Treasury holdings. Ultimately, the company’s financial health remains closely linked to the short end of the interest rate curve, where every 25-basis-point shift significantly impacts revenue in a way that transaction volume cannot currently replace.
Source: forexcrunch.com · 2026-10-10