The fact that the amount of USDC in circulation increased by 72 percent in the last year and reached 75.3 billion dollars was one of the highlights of Circle’s fourth quarter results. While the company’s reserve income increased by 69% to 733.4 million dollars, total income increased to 770.2 million dollars. However, despite this financial growth, the income statement shows that the company transfers most of its revenue to platforms that provide user access.
Sharing of USDC Yield
Circle paid $460.6 million of the amount it earned from reserve income towards distribution and transaction costs. This figure revealed that approximately 63 of every $1 generated by the company’s evaluation of customer deposits went to the platforms. The annual return rate of the reserve portfolio was 3.8 in the fourth quarter. While this rate decreased by 68 basis points compared to last year due to the Fed’s policies, the doubling of the average amount of USDC in circulation enabled the company’s revenues to increase.
Distribution Costs and Market Dynamics
The 52% annual increase in distribution costs points to the fundamental structural tension the industry has as it grows in scale. Circle stated in its statements that the increase was mainly due to distribution payments made to partners. The company discloses the remaining part of its revenues every quarter as “income after distribution costs” and presents this as one of its key performance indicators. In short, Circle retains 37 percent of gross reserve revenue, with the remainder allocated as distribution partners’ share.
The Role of the Balance of Power in Distribution
Circle’s risk statements draw attention to the difficulties that may be experienced in maintaining its relationships with financial institutions and similar companies and the possibility of encountering less advantageous financial conditions. The company particularly emphasizes the structural impact of “a small number of key partners” on distribution and closely monitors the rate at which USDC balances accumulate on platforms. By the end of 2025, $12.5 billion of USDC is held by important partners, which strengthens Circle’s dependence on distribution platforms.
Competition in the industry is based on agreements made with platforms that control access to users, rather than technical innovation. Large distributors may demand better financial terms depending on the size of their user base.
A significant portion of Circle’s revenue remains with the company after negotiations with the platforms. If one of the major platforms promotes another stablecoin or changes incentives, the company’s margins are directly affected. As a result, the market is shaped by the bargaining power of both distributors and issuers.
Falling Interest and Future Margins
The fact that reserve portfolios are operable with current interest rates ensures that both issuers and distributors can maintain their share. However, the possibility of the Fed cutting interest rates in the coming period puts Circle’s margins under pressure, especially in scenarios where distribution costs remain constant. The company’s own statements also state that margins may come under additional pressure if distribution costs decrease less proportionally than reserve revenues.
Political and Economic Debates in the Industry
While Circle’s reserve income is largely transferred to distribution platforms, users do not receive direct returns on their stablecoin deposits. While the newly adopted regulations in the USA provide a framework for payment-oriented stablecoins, discussions about who has the right to the income generated along with regulatory developments are also growing. In the industry, the issue of whether users should receive a share of return from fixed cryptocurrencies that replace deposits has come to the fore.
Circle continues to carefully monitor its financial structure and relationships with partners. It is not an “exit risk” on the company’s balance sheet, but the fact that the partners change the distribution relationship or introduce a different stable cryptocurrency stands out as a primary risk factor.
