Dialogue with Circle CEO: Profit Models, Banking Competition, and Arc Blockchain Strategy

Jeremy Allaire, CEO of Circle, gave an in-depth analysis of the company's book losses under high growth, competition with banks, new partner layout, and the strategic goals of self-developed blockchain Arc. (Synopsis: Stablecoin's new battlefield track: Stripe and Circle's Layer 1 route dispute) (Background supplement: Circle released Q2 earnings: USDC's market value increased by 90% year-on-year, Q3 will push L1 blockchain Arc, CRCL rose 10% premarket) On the first earnings night after listing, Circle handed over a complex answer sheet of "book loss and operating growth". Total revenue and reserve income for the second quarter was $658 million, up 53% year-over-year, and adjusted EBITDA was $126 million, up 52% year-over-year. At the same time, USDC continued to expand on the liquidity side, with an external circulation of $61.3 billion at the end of the period and a stablecoin market share of 28%. However, the company recorded a net loss of US$482 million due to two non-cash factors, namely IPO-triggered large share-based compensation and changes in the fair value of convertible bonds, which combined US$591 million. Outside of earnings day, the industry's competitive framework was rapidly rewritten this summer. The GENIUS Act has officially landed, putting on the table the boundary between "stablecoins issued by banks" and "licensed non-bank issuers". Dante Disparte, chief strategy officer of Circle, said bluntly in a recent interview: The real competition has just begun, and it is still unknown whether banks will rush to issue coins. Circle's partnership footprint is also expanding. Management mentioned each of the deepening cooperation with mainstream exchanges such as Binance (Binance) and OKX on the conference call, as well as integration with payment networks such as Stripe, Visa, Mastercard and banking infrastructure providers such as Fiserv; At the same time, rising USDC balances within the Coinbase platform and new partner distribution agreements also drove up distribution-related costs during the quarter. These structural tensions of "growth-share-cost" are shaping USDC's business model and ecological distribution path. At the same time, Circle also announced Arc, a self-developed blockchain for stablecoin finance. With USDC as the native gas, it pursues ultra-high settlement speed and low volatility rates, and introduces optional privacy and compliance auditable disclosure mechanisms for institutional scenarios, which is regarded as a key step from a "single publisher" to a "full-stack platform". Last night, Circle CEO Jeremy Allaire answered the most concerned questions in an earnings call and a live interview with The Information: Why book losses at high growth? · Future competition between banks and non-bank stablecoins in the context of the Genius Act; "Game-style cooperation" with exchanges, and the layout of new partners; Are you considering applying for a licence in Hong Kong? · Strategic goals and industry niches that Arc Chain wants to achieve Moving Watching Beating integrates the key questions and answers so that readers can quickly and accurately understand Circle management's views on the industry and the company's plans (to read the full text of the call, please go to the full text of the Circle 2025 Q2 earnings call below): Subscription fees, service fees and transaction fees, management plans to increase revenue streams 1. In the second quarter of this year, Circle's revenue increased by 53% year-on-year, But reserve interest still accounts for the lion's share. How can companies reduce dependency? Jeremy Allaire: Our goal is to build the world's largest, regulated stablecoin network, which is still in its early stages. Whether the stablecoin market grows at a compound annual growth rate of 90% or 25% in the future, the inflow will be huge, and we hope to continue to expand the share of USDC. In the past, the company monetized primarily through USDC's currency stock and relied on partners to drive distribution. But since last year, we've launched new products at the protocol layer, blockchain infrastructure, developer tools (such as Circle Wallets), and application layer (such as Circle Payments Network, CPN), and related revenue has increased by 250% year-over-year this quarter. As a next step, we'll introduce higher gross margin models like subscription fees, service fees, transaction fees, and as we've communicated on Wall Street, these revenues could be substantial in the coming years. Adjusted EBITDA increased 52% year-over-year, margins were 50%, and RLDC margins increased more than 200 basis points year-over-year for the quarter, with a significant portion of this coming from new business growth. We are building a full-stack system from infrastructure and stablecoin layer to payment network and developer tools, and working together to form multiple monetization channels, which is a necessary condition for promoting the development of the Internet financial system. 2. USDC circulation in the second quarter was $61 billion, where did the growth momentum come from? What are the incremental opportunities in the future? Jeremy Allaire: The recent growth more reflects the "green light" signal for stablecoins in the global market. This is not only due to the activity of the digital asset market, but also shows that stablecoins have been seen as usable digital cash tools. With an annual growth rate of 90% and a year-to-date increase of 49%, there is huge room for future growth. Stablecoin growth is largely the output result of economic activity. The digital asset market is the starting point, but interest in various segments of financial services is accelerating, with potential that can last for decades. Third-party forecasts range from 25% to 90% CAGR, and our internal model benchmark is 40%, which can still deliver significant returns in uncertain environments. 3. How to see the adoption of USDC in cross-border remittance? Jeremy Allaire: Cross-border remittance demand is growing, both for C2C ( personal transfer ) and for B2B corporate treasury flows. This quarter we expanded our partnerships with Remitly, MoneyGram, ZEPS and others, and the primary use case for CPN is cross-border remittances. The advantage of USDC lies in the global liquidity network and deposit/withdrawal system built over the years, covering key nodes such as banks and payment service providers, so that funds can be settled between different fiat currencies, electronic currencies and bank accounts at low cost. This network effect and delivery capability are difficult to replicate, and simply "issuing a coin" cannot solve the terminal problem of cross-border settlement. 4. Where does the $5.9 trillion on-chain trading volume announced in the earnings report come from? Jeremy Allaire: USDC on-chain transactions are spread all over the world, from Europe and the United States to emerging markets and developing countries, and P2P payments are especially widely used in financial super applications. These transactions include the transfer of funds between exchanges, as well as savings, investments, payments and other purposes. Foxkeen ( Chief Financial Officer ): On-chain transaction volume covers almost all financial service use cases, from C2B, B2B payments to cross-border settlement, compared with the traditional system, this is the first universal Internet architecture for capital flow, so different scenarios are intertwined on the chain and difficult to split exactly. 5) Will Circle accept higher distribution costs for growth in order to create a winner-take-all market? Jeremy Allaire: We are willing to work with institutions that drive the growth of the network, and the structure of cooperation varies depending on the type of partner, not simply the transfer of reserve earnings. The key is win-win, growth-oriented, able to trade at speed...