Key Takeaways Coinbase-linked costs absorbed $324.6M of $701.3M. Circle kept $48.2M after costs and tax. Average USDC rose 25%; reserve income only 5%. Holder rewards come from platforms, not
Split into shares of $100, Circle’s quarter looks like this, based on its second-quarter results filed with the SEC on August 5:
$46.30 Coinbase-linked distribution costs
$12.50 other distribution, transaction and related costs
$36.30 operating expenses: staff, technology, administration
$4.90 operating income, rising to about $6.90 of net income after other income and tax
In dollars, the quarter ran as follows:
Total revenue and reserve income$701.3M Distribution, transaction and other costs−$412.5M Operating expenses−$254.5M Operating income$34.4M Other income, net+$17.9M Income tax−$4.1M Net income, continuing operations$48.2MRounded; steps may not sum exactly.
The $412.5 million line is the one that answers the headline. Most of it, $324.6 million, is tied to Circle’s agreements with Coinbase. The rest covers other partners, transaction costs and related items.
The dollars behind USDC sit in reserves kept apart from Circle’s operating funds. According to Circle’s transparency page, they are held as cash and in the Circle Reserve Fund, which can own short-dated US Treasuries and overnight Treasury repurchase agreements. Those assets earn interest while staying ready to meet redemptions, and that interest is where most of Circle’s revenue comes from.
Holders have no claim on it. Circle’s USDC terms for users outside the European Economic Area state that holders are not entitled to interest or other returns earned on the reserves; EEA holders are covered by separate documentation.
Your dollar becomes USDC
↓
Reserves buy Treasuries and repo
↓
Interest goes to Circle
↓
Circle pays Coinbase and other partners
↓
A platform may choose to pay you a reward
Circle’s earnings release shows average USDC in circulation up about 25% from a year earlier, while reserve income grew only about 5%. The return on reserves fell by 0.66 percentage points as interest rates came down.
The quarterly filing puts numbers on the tug of war: roughly $147.4 million of extra reserve income came from having more USDC outstanding, and roughly $113.9 million was lost to lower yields. Circle still improved where it counts for its own margins. Revenue left after distribution, transaction and other costs rose about 15%.
Coinbase’s cut comes in two parts. It receives income tied to the USDC held on its own platform, after an amount Circle keeps as issuer. It also takes half of what remains from USDC held elsewhere, once other partners’ allocations are paid.
That is why an exchange values USDC balances even when customers are not trading them: the balances earn the exchange money. Competing stablecoins use similar partner economics to win distribution, as Coindoo explained in its look at Open USD’s partner incentives.
When reading these numbers, keep the companies separate. Coinbase’s USDC income and Circle’s reserve income describe the same money from two sets of books, so adding them together counts it twice.
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Any reward a holder receives comes from the platform, on the platform’s terms. Coinbase describes its USDC rewards as a loyalty programme it funds itself, with rates that vary by region and account type, eligibility rules, and the right to change or end it. Moving USDC to another wallet leaves the programme behind.
Membership fees can change the maths. Using hypothetical figures:
+$40
a year from $1,000 at 4%
−$120
a year for a $10 monthly membership
A holder paying for a membership only to unlock the reward would be $80 a year behind on those numbers, before tax. Real rates, balances and other membership benefits would change the result.
Paying with USDC adds a separate set of costs that never touch Circle’s accounts. Payment providers charge businesses for processing, screening, conversion and payouts. Stripe’s documentation, for example, describes customers paying in supported stablecoins while merchants are settled in local currency in their Stripe balance. As Coindoo noted in its piece on stablecoin conversion costs, what matters to the recipient is the amount they can actually spend, the total fees and how long the money takes to arrive.
Circle publishes its third-quarter results on November 4, with updated figures for circulation, reserve yields and partner payments.
This article is provided for informational purposes only and does not constitute financial or investment advice.
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