Circle Defends USDC Business Model Amid Rising Competition for Reserve Income

Circle, the issuer behind the widely used stablecoin USDC, is publicly defending its business model and profit distribution as new competitors emerge offering partners a larger share of income derived from stablecoin reserves. The firm's stance comes amid increasing scrutiny over how stablecoin issuers manage and allocate the interest earned on the assets backing their digital tokens.

In a blog post published on Friday, Kash Razzaghi, Circle's Chief Commercial Officer, detailed the company's financial performance for the first half of 2026. During this period, Circle generated approximately $1.4 billion in revenue. After accounting for $819 million in distribution and transaction costs, the company reported a net profit of about 7 cents for every dollar in revenue.

Razzaghi's post highlighted that the remaining $473 million covered essential operational expenses, including compliance, liquidity management, and product development. This figure also included a significant $214 million allocated to stock-based compensation and related costs, underscoring the firm's investment in its workforce and future growth.

The Battle for Reserve Income

The core of the dispute centers on who benefits from the interest generated by the substantial reserves that back stablecoins like USDC. These reserves, often held in low-risk assets such as U.S. Treasuries, can generate significant income, particularly in periods of higher interest rates.

Circle's largest distribution partner, Coinbase, is also a prominent backer of Open USD, a rival network that launched in June. Open USD, which also counts Stripe and BlackRock among its supporters, aims to allow businesses to mint and redeem stablecoins without fees. Crucially, it proposes to pass the income generated from its reserves directly to participants, after deducting a management fee.

While Circle's blog post did not explicitly name Open USD, whose OUSD token is now live, it subtly addressed the competitive landscape. Other players, such as the Paxos-led Global Dollar Network (USDG), also employ models that share reserve income with participants, intensifying the competition for market share and partnerships.

In his post, Razzaghi asserted, "The costs of redemption, compliance, and resilience don't disappear just because the issuer declined to pay them." This statement underscores Circle's argument that its operational expenditures are necessary to maintain a robust, compliant, and reliable stablecoin ecosystem.

Strategic Moves and Future Outlook

Beyond defending its financial model, Circle has actively pursued new distribution partnerships to solidify its market position. In September, the company secured a significant deal with Binance, which acquired a $100 million stake in Circle. This five-year agreement includes a fee structure tied to the amount of USDC held through Circle's wallet services, indicating a strategic move to deepen integration with major crypto exchanges.

Circle also highlighted improvements to its redemption services. Standard USDC redemptions remain free and typically settle within two business days. Furthermore, qualifying platform customers and payment flows through the Circle Payments Network can now access near-real-time redemptions at no additional cost, enhancing liquidity and usability.

Why it matters

Stablecoins serve as a critical bridge between traditional finance and the broader cryptocurrency ecosystem, facilitating transactions and providing stability in volatile markets. The debate over reserve income distribution impacts the profitability of stablecoin issuers and the attractiveness of their offerings to institutional partners and users. For businesses, the opportunity to earn a share of reserve income could significantly alter their operational economics, potentially driving adoption towards networks offering more favorable terms. This competition ultimately shapes the future infrastructure of digital finance, influencing how capital flows within and between crypto and traditional financial systems.

What to watch

Investors and market participants should closely monitor the evolving strategies of stablecoin issuers as they vie for market share and partnerships. The success of income-sharing models like Open USD will test the traditional issuer-centric approach. Additionally, observe how Circle's strategic alliances, such as the Binance deal, translate into sustained USDC adoption and revenue growth. The regulatory landscape around stablecoin reserves and their associated income streams will also play a crucial role in shaping the competitive environment.