Circle's Revenue Grows, But IPO Filing Shows Falling Profitability

Circle Internet Financial, the company behind USD Coin USDC/USD, is showing a mixed financial picture ahead of its planned public listing, with revenue up by 16%, but profitability down due to higher costs and increased redemptions.

What Happened: In a post dissecting the newly filed S-1 prospectus, Matthew Sigel, Head of Digital Assets Research at VanEck, highlighted the disconnect between Circle's topline momentum and its bottom-line performance.

According to Sigel, the company's earnings before interest, taxes, depreciation and amortization (EBITDA) fell by 78%, while net income dropped 66%, despite strong revenue growth.

The reason: rising costs and a more competitive market environment.

Sigel noted that Circle's redemptions surged to $165 billion in 2023, up from $98 billion in 2022, suggesting that users are increasingly rotating capital in and out of the stablecoin—likely to optimize yield.

He pointed to a "deterioration in margins" driven by this dynamic, as Circle's profitability depends heavily on its ability to retain interest-earning reserves.

On the expense side, Sigel observed that "Circle's share-based compensation rose from $103 million in 2022 to $164 million in 2023," an increase he labeled "arguably unjustified."

The company's full-time employee count grew only modestly, from 326 to 359, indicating that higher average pay and equity grants significantly contributed to expense growth.

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Why It Matters: The financials also reflect a broader pressure on USDC's dominance.

While it remains the second-largest dollar-pegged stablecoin after Tether USDT/USD, USDC's market share has faced headwinds in a highly competitive environment.

Still, Circle reported interest income of $779 million in 2023, largely from its holdings in short-duration U.S. Treasuries.

Circle's IPO filing with the SEC signals the company's renewed ambition to go public, following its failed 2021 SPAC merger.

The company intends to list its Class A shares on the New York Stock Exchange under the ticker symbol "CRCL," though pricing details remain undisclosed.

CEO Jeremy Allaire said that becoming a publicly traded firm is "a continuation of our dedication to transparency and accountability," positioning the IPO as part of Circle's broader mission to modernize financial infrastructure through blockchain-based assets.

The filing comes at a pivotal time, as USDC recently regained market confidence following a de-pegging scare linked to the Silicon Valley Bank crisis, and as political momentum builds around stablecoin legislation in the U.S.

President Donald Trump has expressed support for stablecoin regulation aimed at preserving the dollar's global influence, a move that could benefit Circle as it enters public markets.

If successful, Circle would join the ranks of other publicly listed crypto companies such as Coinbase COIN and Block Inc. XYZ, offering investors a new way to gain exposure to the rapidly evolving stablecoin sector.

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