Artemis: Circle's Stablecoin Expansion and the Emerging Smart Agent Economy

Author: Lucas Shin, Source: Artemis, Translated by: Shaw Jinse Finance

The current market views Circle as an interest rate-sensitive money market fund—essentially betting on the on-chain implementation of the federal funds rate. We believe this positioning underestimates its business value. Despite the Federal Reserve cutting interest rates by 75 basis points in the second half of 2025, the supply of USDC still increased by 72% year-on-year, reaching $75.3 billion, indicating that its demand stems from real-world practical applications, rather than simply profit-seeking behavior.

Our baseline scenario predicts that by 2030, the overall stablecoin market size will reach approximately $1.5 trillion, with an average USDC supply of $284 billion.

Even with the expected narrowing of reserve yields, Circle's reserve yields will still reach $9.2 billion by 2030 (approximately 3.5 times that of 2025) due to sufficient issuance growth to offset the impact of declining interest rates. Coupled with Circle's payment network (CPN) revenue expanding to $350 million and distribution cost ratio decreasing from 60% to 55%, the company's total revenue in 2030 is projected to reach $9.8 billion, with net profit of approximately $1.8 billion, under the baseline scenario. Multiple positive factors support this development path: The GENIUS Act has established a federal-level regulatory framework for stablecoins, benefiting compliant issuers; Circle's payment network has been connected to 55 financial institutions, with an annualized total payment volume (TPV) of $5.7 billion, initially forming a transaction-based revenue source and reducing reliance on interest rates; stablecoin applications are continuously expanding into inter-enterprise payments, cross-border settlements, and decentralized finance (DeFi) fields. Under the baseline scenario, Circle's projected earnings per share (EPS) in 2030 is $6.73; based on a terminal P/E ratio of 25, the target price is approximately $168, representing an 83% upside from current levels.

Comparative Analysis

Currently, there are no listed companies directly comparable to stablecoin issuers that profit from reserve interest rate spreads. The comparable company pool covers enterprises with core commonalities to Circle's business: companies based on floating-rate profit models (Charles Schwab, Interactive Brokers), digital payment infrastructure service providers (PayPal, Wise, dLocal, Bill.com), crypto-native platforms (Coinbase), and high-growth infrastructure companies using usage-based billing models (Snowflake, Confluent).

What does Circle do? Circle is the issuer of the USD stablecoin USDC, which is pegged 1:1 to the US dollar. When a user deposits US dollars, the system mints USDC; when a user redeems their USDC, it is destroyed. Circle's core revenue source is the interest income generated from its reserve assets (approximately 43% reverse repurchase agreements, 43% U.S. Treasury bonds, and 14% bank deposits, held in custody by BNY Mellon and managed through BlackRock USDXX Fund).

Key details in the cost structure: Coinbase, as the primary distribution partner for USDC, receives USDC held on its platform. This includes all reserve revenue generated, plus 50% of USDC reserve revenue from outside the platform. In 2025, Coinbase received $1.35 billion, representing 51% of Circle's gross reserve revenue. If non-Coinbase distribution costs (12.7%) are included, total distribution costs consume approximately 61% of reserve revenue, leaving only a 39% gross margin. We predict that as non-Coinbase distribution channels expand and new financial institutions, banks, and custody partners reach more favorable terms than current Coinbase agreements, the distribution cost percentage will decrease from 60% to 55% by 2030. This will drive the gross margin up from 39% to 54% during the forecast period.

Besides reserve fund returns,Circle's most important growth engine is the Circle Payment Network (CPN)—a cross-border B2B settlement network built on USDC.

The total size of the stablecoin market has grown from approximately $137 billion in 2022 to approximately $308 billion in 2025. Our model predicts that the market size will reach approximately $1.5 trillion by 2030, with a compound annual growth rate (CAGR) of approximately 37%.

The total size of the stablecoin market has grown from approximately $137 billion in 2022 to approximately $308 billion in 2025.

We expect USDC to maintain a market share of 22%–25% (with a slight decline from the current 24.8% as white-label stablecoins and bank-affiliated stablecoins intensify market competition), and USDC issuance will reach $338 billion by 2030 (approximately 4.5 times the current amount). In short, even if Circle's actual reserve yield declines, the significant increase in USDC issuance—from $63 billion to an average of $284 billion—would be enough to completely offset the impact of the yield decline. Therefore, reserve yield would increase 3.5 times, from $2.64 billion to $9.24 billion. Using a reverse DCF calculation based on the current share price, the market expects USDC issuance in 2030 to be only $120 billion–$150 billion, an increase of only 60%–100% from the current level. Our baseline scenario predicts an increase of 350%. This difference in expectations is the core of this investment logic. Argument Two: The Smart Agent Economy Will Drive the Next Wave of Stablecoin Demand. By 2030, AI agents will have the ability to autonomously complete transactions. McKinsey predicts that the global smart agent transaction volume will reach $3 trillion to $5 trillion by 2030; Gartner predicts that by 2028, AI agents will mediate more than $15 trillion in business-to-business (B2B) procurement transactions. Such transactions naturally require stablecoins as the transaction infrastructure: Stablecoins are becoming the underlying settlement infrastructure for this emerging smart agent economy, and Circle's business model will expand accordingly. When smart agents hold USDC in their wallets to support autonomous transactions, Circle earns interest on every dollar in these reserves. The larger the USDC pool held by smart agents, the higher their revenue base, regardless of transaction frequency. USDC has become the default stablecoin for smart agent payments. In the six months since the x402 payment standard (native HTTP micropayment) became widespread, it has processed approximately 177 million transactions, totaling nearly $106 million. Over 99.6% of these transactions were settled via USDC. This first-mover advantage creates a positive flywheel effect: new developers will default to supporting USDC due to its highest ecosystem integration; this further deepens integration, making it more difficult for competitors to enter the market. While we did not include smart agent-related revenue in our baseline scenario, we consider the demand generated by smart agents as a potential upside potential in a bull market scenario. Even if only 1%–2% of McKinsey's lower limit of $3 trillion is settled through the USDC system, this still means an additional $30 billion–$60 billion in USDC float will be added to the smart agent wallets, from which Circle can earn passive interest income. Valuation and Scenario Analysis We value CRCL using a terminal price-to-earnings ratio based on the projected 2030 earnings per share (EPS). **In the baseline scenario, the company's net income is $1.84 billion, with a diluted total share capital of 273.9 million shares, corresponding to earnings per share of $6.73.** A terminal P/E ratio of 25x—higher than the industry average, reflecting Circle's structural growth path, revenue diversification from the Circle Payment Network (CPN), and regulatory advantages—implies a target share price of approximately $168 by 2030, representing an 83% upside from current levels. A P/E ratio of 25 is between JPMorgan Chase's (JPM) P/E ratio of approximately 15 and Coinbase's approximately 38, which is a reasonable valuation for a high-growth infrastructure company that is shifting towards recurring, interest rate-insensitive revenue.

Baseline Scenario

As stablecoin supply continues to grow and the Circle Payment Network (CPN) expands smoothly, the overall stablecoin market size reaches $1.5 trillion, with USDC maintaining a 22.5% market share. Distribution costs slightly decrease to 55% as new financial institution partners agree to lower revenue sharing ratios.

Pessimistic Scenario

Assuming a slowdown in stablecoin adoption, white-label stablecoins squeeze USDC's market share to 20%, interest rate cuts reduce reserve yields to 2.75%, and CPN rollout falls short of expectations. Based on 2030 projected earnings and a terminal P/E ratio of 15x, the target price is $46.92, representing approximately a 49% downside and an internal rate of return (IRR) of -15.5%.

Management

We believe Circle's management team is above average in the crypto infrastructure sector, particularly excelling in regulatory compliance (holding money service licenses in 49 US states and being among the first to achieve compliance with EU MiCA regulations).

• Jeremy Allaire: Co-founded Circle in 2013, currently serving as Chairman and CEO. A serial entrepreneur (formerly CTO of Macromedia, founder and CEO of Brightcove, which completed its IPO in 2012). He transformed Circle from a consumer payment application into a stablecoin infrastructure provider, launching USDC in partnership with Coinbase in 2018. After a failed attempt to list SPAC in 2022, Circle completed a traditional IPO on the NYSE in June 2025.

• Heath Tarbert: President, promoted from Chief Legal Officer in January 2025. Jeremy Fox-Geen: Chief Financial Officer since January 2021. Previously served as Chairman and CEO of the U.S. Commodity Futures Trading Commission (CFTC) (2019–2021), Assistant Secretary of the U.S. Treasury, and Chief Legal Officer of Citadel Securities. Dante Disparte: Chief Strategy Officer and Head of Global Policy and Business. Previously served as Founding Executive and Vice Chairman of the Diem Association, a stablecoin project under Meta, responsible for global regulatory strategy, public policy, market development, and international business.

Key Management Risks: The concentration of founders' power and the high post-IPO share-based compensation (SBC) (over $500 million in 2025, including $424 million in IPO-related restricted stock units with accelerated confirmation) have gradually returned to normal (SBC in Q3 and Q4 of 2025 were $59 million and $48 million respectively, with an annual run rate expected to be below $200 million).

Risks

Competition between white-label stablecoins and platform-native stablecoins

The most underestimated risk to USDC's market share is that major platforms, mainstream applications, and financial institutions are launching their own branded stablecoins. For example, Hyperliquid issued USDH, PayPal issued PYUSD, Fidelity issued FIDD, and JPMorgan Chase issued JPMD. Polymarket recently launched "Polymarket USD," currently a USDC-wrapped token, but likely a transitional step towards independent settlement. If this model expands significantly under the GENIUS framework, USDC may gradually lose its status as the default settlement channel. This divergence has been considered in the baseline scenario, predicting USDC's share will decrease from 24.8% to 22.5% by 2030. Hedging measures: White-label stablecoins still require reserve infrastructure, compliance capabilities, and most importantly, deep liquidity. USDC is already integrated with all major exchanges, wallets, DeFi protocols, and cross-chain bridges; new branded stablecoins must first replicate this liquidity network before operating as independent settlement tokens. High liquidity pools, narrow spreads, and instant redemption capabilities are difficult to build quickly, and decentralized stablecoins with low liquidity will provide users with a worse trading experience. The conversion cost of building a completely independent reserve is extremely high, and most platforms may never be able to complete this transition. Federal Funds Rate Sensitivity: Reserve yields are directly linked to interest rates. Assuming an average USDC size of $284 billion in 2030, a 100 basis point decrease in interest rates corresponds to a reduction of approximately $2.8 billion in gross reserve yields. If the Fed cuts rates to 2.0%, reserve yields in 2030 will decline by 25%–30% compared to the baseline scenario. Current pricing in the forecasting market, Kalshi, indicates a 63% probability of further rate cuts before 2027. Hedging Measures: Even with a yield of only 2.5%, the average $284 billion USDC would still generate $7.1 billion in reserve yields, 2.7 times that of 2025 ($2.64 billion at a 4.19% yield). Unless extreme interest rate scenarios occur, the increase in issuance volume is sufficient to offset the impact of declining interest rates. **Concentration on a Single Product and Dependence on Coinbase** In 2025, USDC reserve earnings accounted for over 96% of total revenue. Coinbase holds approximately 67% of the US cryptocurrency exchange market share and takes 51% of reserve earnings. As mentioned earlier, if Coinbase launches its own stablecoin, significantly renegotiates partnership terms, or regulatory headwinds slow USDC issuance growth, its overall revenue base will be at risk. **Hedge Measure 1:** Coinbase earns $1.35 billion annually from partnerships and bears virtually no balance sheet risk, making it unlikely to launch a competing stablecoin. Even so, Coinbase would need to rebuild the regulatory and liquidity system that Circle spent years building. Hedging Measure 2: The market has long questioned Visa's reliance on a single product business, but Visa's value-added services revenue reached $10.9 billion in 2025 (up 24% year-on-year), indicating a significant reduction in its dependence on exchange fees. We believe CPN is a key engine for Circle's revenue diversification. By the end of 2030, CPN is expected to generate $350 million in transaction revenue (approximately 4% of total revenue), which is insensitive to interest rates and independent of the Coinbase partnership. In the long term, bypassing Coinbase's institutional and B2B USDC issuance will naturally reduce overall distribution costs. Tether Resilience and Competitive Landscape: USDT's current issuance volume is nearly 2.5 times that of USDC, and Tether is rapidly narrowing the regulatory gap with USDC. In January 2026, Tether launched USAT, a stablecoin compliant with the GENIUS Act, issued by Anchorage Digital Bank, regulated by the OCC, opening up the previously inaccessible US institutional market for Tether. If Tether successfully implements its dual-currency strategy (USDT for global liquidity, USAT for US compliance), USDC's regulatory moat will significantly narrow. Hedging Measures: The competitive landscape exhibits structural differences. USDT dominates centralized exchange trading outside the US and remittances to emerging markets, while USDC dominates DeFi collateral (default currency for Aave, Compound, and Uniswap), US institutional adoption, cross-chain bridges (CCTP accounts for 47%–50% of cross-chain transaction volume), and B2B payments (valued at $235 billion in 2025, a year-on-year increase of 733%, with USDC accounting for approximately 65%). Essentially, they are different products serving different target markets. Furthermore, our core logic is based on the overall expansion of the stablecoin market, rather than taking market share from Tether; both stablecoins are expected to achieve significant growth.