The easiest way to misunderstand Circle is to call it only a stablecoin company.

Circle issues USDC, a digital dollar used across crypto exchanges, DeFi applications, payment networks and cross-border settlement. But the business underneath the token is closer to a highly liquid bond portfolio with a global distribution problem.

Users hold USDC. Circle holds cash and short-term Treasuries behind it. Those reserves earn interest. That interest is where the money is.

In the first quarter of 2026, Circle generated $694.1 million in total revenue and reserve income, according to the Decentralised News framework. Of that, $652.5 million came from reserve income, or roughly 94% of the total. The technology line of the business, subscriptions, services and transactions, was much smaller.

That is a profitable model when rates are high and circulation is growing. It is also a model that depends on two things Circle does not fully control: the Federal Reserve and its distribution partners.

The Fed determines the size of the interest pool. Lower short-term rates mean the same amount of USDC reserves earns less income. But distribution determines how much of that income Circle gets to keep.

That is where Coinbase becomes central to the story.

Under Circle’s revenue-sharing arrangement with Coinbase, Coinbase receives all interest income on USDC held directly on its platform and half the interest income on USDC held elsewhere. In 2024, Coinbase received $908 million from Circle, roughly 54% of Circle’s total revenue that year, even though Coinbase directly held only about one-fifth of USDC supply.

It is a striking reminder that stablecoin circulation is not the same as stablecoin profitability.

A token can be large, trusted and widely used, yet the issuer may still share much of the economics with whoever controls the users.

That is why Circle’s most important competitive threat was never only Tether. Tether remains the dominant offshore stablecoin, with a larger supply and a simpler economic model that lets it keep reserve income without a Coinbase-style split. But the deeper threat to Circle comes from the companies that control payment networks, wallets, merchants, exchanges and institutional clients.

Those firms have realised that stablecoins are not just payment tokens. They are pools of dollar float.

On June 30, 2026, more than 140 companies including Visa, Mastercard, Stripe, BlackRock, BNY and Coinbase launched Open USD, a consortium-governed stablecoin designed to return most reserve income to distribution partners rather than to a single issuer. Circle’s stock fell sharply because the challenge was not technological. It was economic.

Open USD asks a simple question: if payment companies and exchanges bring the users, why should one issuer keep the interest?

Visa’s move two weeks later made the shift clearer. Its Stablecoin Platform, launched in beta in July 2026, gives banks, fintechs and crypto firms infrastructure to mint, hold, redeem and transfer stablecoins. It supports Open USD, USDC and USDG.

That matters because Visa does not need one stablecoin to dominate. If USDC wins, Visa can process it. If Open USD gains traction, Visa can process that too. If another regulated stablecoin finds a profitable corridor, Visa can sit in the middle. The coin is the asset. The rails may become the business.

Banks are approaching the same opportunity through tokenized deposits. JPMorgan’s JPMD is not structured as a payment stablecoin in the Circle sense. It represents a bank deposit. That distinction matters because bank deposits can pay interest directly to holders, while USDC cannot. For institutions, a tokenized deposit may offer speed, settlement efficiency and a familiar banking relationship in one package.

Circle is not without defences. It has one of the most trusted brands in digital dollars, institutional relationships, a national trust charter, USDC liquidity and a growing payments network. It is also trying to build beyond reserve income through initiatives such as Arc and broader settlement infrastructure.

But the problem is that these newer businesses remain small compared with the interest engine. Circle still depends heavily on USDC reserves, rates and its ability to retain margin after partner payouts.

That is the number investors should focus on: the retention ratio.

The retention ratio asks how much reserve income a stablecoin issuer keeps after distribution partners take their share. It is more revealing than circulation alone. A $100 billion stablecoin with weak retention may be less attractive than a smaller one with stronger control over its economics.

The next phase of the stablecoin market will be fought on three fronts.

Issuers will compete on trust, reserves and redemption. Payment networks will compete to become the rails for digital dollars. Banks will compete through tokenized deposits that keep customers inside the regulated banking system.

Circle sits in the middle of all three contests.

It helped make USDC one of the world’s most important stablecoins. Now the companies that helped distribute digital dollars want more of the economics behind them.

That is the uncomfortable lesson of the stablecoin boom.

The token may be stable.

The margin is not.

Related reading: 

Best Stablecoin for Every Use Case: The Stablecoin Utility Index

Stablecoin Yield Rankings 2026: Where to Park Your Dollars for the Best Risk-Adjusted Return

The DN Stablecoin Depeg Radar: How to Track USDT, USDC, DAI and USDe Risk

The DN Dry Powder Index: How Stablecoin Supply Tracks Crypto Buying Power