Coinbase earned $300 million from Circle in Q1 2025, while Circle’s total net revenue was only $230 million.
This surprising dynamic, revealed in JPMorgan’s July 2025 report, values the partnership at $55-60 billion and shows how Coinbase has positioned itself to profit more from USDC than the stablecoin’s own creator.
Key Takeaways
JPMorgan values the Circle-related economics to Coinbase shareholders at $55-60 billion
Coinbase holds 20% of all USDC in circulation, up from 5% in 2022, plus 8.5 million Circle shares worth $1.6 billion
The partnership allows Coinbase to acquire customers at zero or negative cost through Circle-funded yield incentives
Interest rate changes pose the biggest risk, a 1% drop could reduce Circle’s annual revenue by $441 million
The $300 Million Question: Revenue Breakdown
On-Platform USDC Revenue
Coinbase’s on-platform USDC operations generated $125 million in Q1 2025 from $13 billion in USDC balances.
These revenues came with 20-25% profit margins, as Coinbase earns interest on USDC held by users on its platform, similar to how banks profit from deposits, but with higher margins due to crypto infrastructure efficiencies.
Off-Platform Circle Reserve Fund Revenue
The off-platform revenue stream produced $170 million at nearly 100% profit margins.
This comes from Coinbase’s 50/50 split with Circle on income from the Circle Reserve Fund, which holds USDC’s backing assets (primarily U.S. Treasuries and overnight repos) managed by BlackRock.
Comparison with Circle’s Performance
Circle’s Q1 2025 net revenue of $230 million fell $70 million short of what it paid Coinbase alone.
This happens because Circle bears substantial distribution costs, over $1 billion annually to partners including Coinbase and Binance, while Coinbase collects revenue without operational overhead.
Understanding the USDC Partnership Structure
Historical Context
USDC launched in 2018 through the Centre Consortium, a joint venture between Coinbase and Circle.
The partnership combined Circle’s regulatory expertise with Coinbase’s distribution network to create a regulated alternative to Tether’s USDT.
In August 2023, the companies dissolved Centre and restructured their relationship.
Coinbase acquired 8.5 million Circle shares (now worth $1.6 billion) and formalized the current revenue-sharing arrangement.
Revenue Sharing Mechanics
The partnership operates on a “residual payment base” model:
Platform Revenue: Coinbase keeps revenue from USDC on its platform
Off-Platform Split: Reserve income from USDC held elsewhere splits 50/50
Growth Incentives: Circle funds programs helping Coinbase acquire users at minimal cost
This structure rewards Coinbase for both attracting USDC to its platform and supporting broader USDC adoption.
Market Position & Growth
Coinbase now holds 20% of USDC’s circulation (approximately $12 billion), up from 5% in 2022.
This growth outpaced USDC’s overall 78% year-over-year expansion in 2024, the fastest among major stablecoins.
JPMorgan’s $60 Billion Valuation Analysis
Valuation Components
JPMorgan breaks down the $55-60 billion valuation:
Equity Stake: $1.6 billion (8.5 million Circle shares)
Revenue Stream Value: $53-58 billion
Future Growth Options: Additional unquantified value
The model assumes continued USDC growth, interest rates above 3%, and current revenue-sharing terms.
This valuation represents about 25% of Coinbase’s market cap, suggesting investors may undervalue this income stream.
Market Comparison
Circle’s post-IPO market cap reached $63 billion, meaning JPMorgan values Coinbase’s USDC economics at nearly Circle’s entire company value, without the operational costs or regulatory burden of issuing the stablecoin.
JPMorgan maintains a neutral rating on Coinbase with a $404 price target, versus the stock’s $381 trading price.
Strategic Advantages for Both Companies
Coinbase Benefits
Negative-Cost Customer Acquisition: Circle-funded yields let Coinbase attract users while profiting from deposits, reversing typical fintech economics where acquisition is expensive.
Stable Revenue Stream: Unlike trading fees that fluctuate with crypto prices, USDC revenue depends on interest rates, providing predictable income during market downturns.
Institutional Gateway: USDC serves as the entry point for conservative institutions seeking regulatory clarity in crypto.
Circle Benefits
Distribution at Scale: Coinbase’s 100+ million users provide unmatched reach for USDC adoption among compliant exchanges.
Market Liquidity: Coinbase’s trading volume creates deep USDC liquidity essential for stablecoin success.
Regulatory Credibility: Partnership with a public U.S. company strengthens Circle’s standing with regulators and banks.
Competitive Advantages
The partnership creates significant barriers to competition through regulatory compliance (especially post-GENIUS Act), network effects where each user adds value for others, and deep integration across DeFi and traditional finance systems.
Circle’s IPO and Market Performance
IPO Details
Circle went public on June 5, 2025, pricing at $31 per share and raising $1.05 billion.
The stock surged 180% on day one to $88, eventually reaching $248, a 700% gain making it one of 2025’s most successful IPOs.
JPMorgan, Goldman Sachs, and Citigroup led the offering.
CEO Jeremy Allaire sold 1.5 million shares for $49 million while keeping 23.7% voting control.
Financial Performance
Circle’s S-1 filing showed:
2024 Revenue: $1.68 billion (99% from reserve interest)
Distribution Costs: $1.01 billion to partners
Net Income: $156 million (down 42% from 2023)
The concentration in interest income highlights both profitability potential and rate sensitivity.
Market Competition and Industry Dynamics
Stablecoin Market Landscape
Current market shares show Tether maintaining dominance despite USDC’s faster growth:
Tether (USDT): $158.9 billion (61% market share)
USDC: $62.6 billion (25% market share)
Others: 14% (including PayPal USD, Ripple USD)
USDC gains come primarily from institutional adoption where compliance matters most.
For the latest stablecoin news, regulatory clarity remains the key differentiator.
Regulatory Advantages
The GENIUS Act established clear rules favoring compliant stablecoins:
1:1 backing with cash and equivalents required
Monthly attestations by major accounting firms
Bank partnership framework for custody and operations
Circle’s proactive compliance, including first-mover MiCA licensing in Europe, positions USDC to capture institutional demand Tether cannot access.
Future Growth Catalysts and Risks
Growth Drivers
Banking Integration: FIS partnership brings USDC to thousands of financial institutions through existing infrastructure.
Blockchain Expansion: Native support on 23 networks expands addressable markets with each integration.
Payment Adoption: Shopify and e-commerce platforms exploring USDC could transform retail payments.
Institutional Products: Yield-bearing variants target the massive fixed-income market.
Key Risks
Rate Sensitivity: Each 1% rate decline costs Circle $441 million annually, a major concern if the Fed cuts rates.
Bank Competition: JPMorgan’s JPMD token shows traditional finance building competing products.
Regulatory Changes: Implementation details of new rules could increase costs or limit business models.
Partnership Terms: Circle’s filing notes risks from Coinbase’s influence over revenue splits and strategy.
Investment Implications and Analyst Perspectives
Wall Street Views
Beyond JPMorgan, analyst opinions vary:
Cantor Fitzgerald: Sees USDC as Coinbase’s “hidden asset” potentially worth $100+ billion
Citron Research: Questions whether 50/50 splits remain sustainable
Consensus: Average $425 price target suggests modest upside
Key Metrics to Watch
USDC Supply: Target $100 billion by end-2025
Coinbase’s Share: Currently 20%, targeting 30%
Revenue Splits: Any renegotiation impacts profitability
Interest Rates: Direct correlation to revenue
New Entrants: Bank stablecoins could pressure share
Conclusion: The Future of Crypto’s Most Valuable Partnership
The Coinbase-Circle partnership demonstrates exceptional strategic positioning.
By structuring deals that deliver more revenue to Coinbase than Circle generates in total, both companies created mutual value while advancing stablecoin adoption.
JPMorgan’s $60 billion valuation may prove conservative if USDC becomes the bridge between traditional finance and blockchain.
As regulations clarify and institutions adopt digital assets, the partnership’s value could multiply significantly.
The Circle partnership exemplifies this shift, delivering predictable, high-margin revenue that traditional metrics better capture than volatile trading volumes.
Read Next:
FAQs:
1. Why does Coinbase earn more from USDC than Circle itself?
Coinbase earned $300 million in Q1 2025 while Circle’s total revenue was $230 million because Coinbase receives revenue without bearing operational costs. Circle pays over $1 billion annually in distribution costs to partners, while Coinbase collects both platform revenue (with 20-25% margins) and 50% of off-platform reserve income (at nearly 100% margins).
2. What is the Circle Reserve Fund and how does it generate revenue?
The Circle Reserve Fund holds USDC’s backing assets, primarily U.S. Treasuries and overnight repurchase agreements, managed by BlackRock. These assets generate interest income based on prevailing rates. Coinbase receives 50% of income from USDC not held on its platform, which totaled $170 million in Q1 2025.
3. How much is Coinbase’s stake in Circle worth?
Coinbase owns 8.5 million Circle shares valued at $1.6 billion as of July 2025. However, JPMorgan values the total Circle-related economics to Coinbase at $55-60 billion when including ongoing revenue streams from USDC operations.
4. What risks could impact the Coinbase-Circle partnership value?
The main risk is interest rate sensitivity, a 1% rate decrease reduces Circle’s annual revenue by $441 million. Other risks include competition from bank-issued stablecoins, potential renegotiation of revenue splits, regulatory changes, and Circle’s dependence on Coinbase for distribution.
5. How does USDC compare to Tether (USDT) in market share?
As of 2025, Tether maintains market leadership with $158.9 billion (61% market share) versus USDC’s $62.6 billion (25% share). However, USDC grew 78% year-over-year in 2024, faster than any major stablecoin, and benefits from superior regulatory compliance that attracts institutional users.