Circle — Is This How Money Goes Digital?
The Story of Circle and the rise of the stablecoin economy
A CFO toggles between two screens late at night. On one, her company’s online banking portal displays a “Pending” status for a $5 million wire transfer to a supplier in London, funds stuck in the labyrinth of correspondent banks and cutoff times. Conversely, a blockchain dashboard shows 5,000,000 USDC zipping to the same counterparty’s final and irrevocable wallet in 28 seconds. She exhales in relief. In the span of a coffee break, one payment cleared while the other is still somewhere in the SWIFT network. It’s a scene replaying in finance offices worldwide: the old rails of money are grinding, even as a new track runs alongside at internet speed.
The Frictions of Fiat Money
That CFO's frustration? It's not unique to million-dollar transactions. Try explaining to your freelance designer in Romania why their $800 payment will take three business days and cost $45 in fees. Or watch a small restaurant owner in Miami scramble to pay their produce supplier before the 3 PM cutoff, knowing that missing it means their weekend inventory gets delayed until Tuesday.
The mechanics behind these delays read like a museum exhibit. Your money doesn't travel directly from Bank A to Bank B. Instead, it hops through a network of correspondent banks, financial institutions that maintain accounts with each other to facilitate transfers. Each hop introduces a delay while computers reconcile ledgers that were designed when Nixon was president. The SWIFT network, launched in 1973, still runs on batch processing. Your urgent payment gets queued with thousands of others, waiting for the next processing window.
Here's what's absurd: the same technology that lets you stream 4K video to your phone instantly can't move your money across town without a 24-hour delay. Banks have spent billions on sleek mobile apps and AI chatbots, but the underlying plumbing remains stubbornly analog. When JPMorgan processes an international wire, the actual settlement happens through systems that predate the internet.
The costs pile up in ways most people never see. That $45 wire fee is just the beginning. There's the foreign exchange spread, banks buying your dollars at one rate and selling them at another, pocketing the difference. There are correspondent bank fees, often hidden in the "lifted charges." For a business sending regular international payments, these invisible taxes can reach thousands per month.
But the real killer isn't the fees, it's the uncertainty. You send $10,000 on Monday. It might arrive on Tuesday. It could be Thursday. The recipient calls asking where their money is, and you're stuck refreshing a banking portal that shows nothing more helpful than "Processing." Cash flow planning becomes educated guesswork when you can't predict when your own money will actually move.
This isn't just inconvenient. It's economically wasteful on a massive scale. Companies hold excess cash reserves because they can't trust that money to move when needed. Small businesses in developing countries are excluded from global commerce because the payment rails are too expensive and unreliable. A clothing manufacturer in Bangladesh might deliver a perfect order to a U.S. retailer, only to wait weeks for payment while banking bureaucracy churns through the process.
These frictions aren’t new. For decades, global finance has innovated around them (credit cards, PayPal, fintech apps), yet the underlying infrastructure remains full of speed bumps. Money still doesn’t move with the same ease as data. That’s the status quo a new breed of digital dollar aims to overhaul.
Stablecoins: Retrofitting Cash for the Internet Age
Remember that CFO waiting for her $5 million wire transfer? Stablecoins solve her exact problem. They're digital tokens designed to hold steady value, typically pegged 1:1 to the US dollar, but they move on blockchain rails instead of banking ones.
Stablecoins cracked the code by combining dollar stability with blockchain speed. Early crypto was fast but volatile, nobody wanted to pay for coffee with Bitcoin that might be worth 20% less by the time the transaction cleared. Traditional dollars were stable but trapped in slow banking infrastructure from the 1970s.
Stablecoins cracked the code by keeping the dollar's stability while switching the delivery mechanism. When you send USDC, you're sending actual dollars backed by real reserves, but instead of hopping through correspondent banks, the transaction settles directly on blockchain in seconds. Same underlying asset, completely different delivery system.
Take Arf, a Swiss liquidity provider for cross-border payment companies. Before stablecoins, their clients had to prefund accounts in destination countries, park millions of dollars in foreign banks just to enable same-day settlements. This tied up an estimated $4 trillion globally in prefunded accounts.
Now, Arf provides instant liquidity using USDC.
When a payment company needs to settle with a partner in Manila, Arf sends USDC in real-time instead of pre-funding cash. In their first year, Arf supplied over $1 billion in on-chain liquidity, freeing up working capital that was previously locked in foreign bank accounts.
From a user perspective, spending USDC feels like spending digital dollars. But under the hood, it settles 24/7/365 without asking permission from correspondent banks or respecting business hours. Need to pay a contractor in Prague at 3 AM on Sunday? USDC makes it happen in seconds for pennies in fees, even when every bank is closed.
[For more on stablecoins, read: Stablecoins in 1,000 words]
Three Flavors of Stablecoins
Not all stablecoins are created equal. Broadly, they come in a few flavors, each with a different design and trade-offs:
Fiat-backed stablecoins is by far the most common. It works like digital banks. Every coin is backed by one unit of fiat currency held in reserve. These work like a digital IOU for actual dollars. A user can always redeem 1 token for 1 real dollar from the issuer.
This category includes USD Coin (USDC) issued by Circle, Tether (USDT) issued by Tether Holdings, and others like Pax Dollar. Their stability hinges on trust that the issuer truly has those dollars stashed safely. Practically, fiat-backed coins have maintained pegs by holding high-quality, liquid reserves.
Crypto-backed stablecoins use other cryptocurrencies as collateral instead of dollars. The system accepts deposits of volatile crypto assets like Ethereum, then issues stable tokens against that collateral. Because crypto collateral can swing wildly in value, these systems often require excess backing (e.g. $1.50 of ETH for every $1 of DAI). The upside: they’re more decentralized, no bank account full of dollars needed, but the downside is complexity and dependence on volatile assets.
MakerDAO pioneered this approach with DAI.
Algorithmic stablecoins.The most experimental (and infamous) type. These stablecoins attempt to hold a peg purely via algorithms and market incentives, without any hard collateral. These systems typically used complex mechanisms involving secondary tokens that would theoretically absorb price volatility and maintain the peg through market incentives. In theory, algorithmic designs are the holy grail of an independent stable-value currency. In practice, most have failed catastrophically.
The poster child is TerraUSD (UST), which imploded in 2022, erasing ~$40 billion in value when its algorithmic peg collapsed. Other algorithmic experiments like Iron Finance and Fei Protocol met similar fates. These crashes rippled through crypto markets and rang alarm bells for regulators worldwide. Today, purely algorithmic stablecoins remain outliers, cautionary tales of how stability is hard-earned in finance.
Today's reality is dominated by the boring, profitable approach: fiat-backed tokens that actually hold the dollars they represent. Collectively, stablecoins have grown from virtually nothing in 2017 to a more than $200+ billion market, settling trillions in transaction volume each year. They've evolved from crypto trading tools into infrastructure for international payments, with companies using them to bypass traditional banking delays and fees.
Stablecoins have become so integral that we may be entering a "stablecoin supercycle" for fintech, a phase where every global company is figuring out how to leverage always-on digital dollars.
Circle
Of all the companies racing to build this digital dollar future, one has emerged as the narrative focal point: Circle, the company behind USDC.
Founded in 2013 by entrepreneur Jeremy Allaire, Circle began with a grand mission “to raise global economic prosperity through the frictionless exchange of value”. In its early years, Circle experimented in the consumer payments space (even offering a Bitcoin-based social payment app at one point), but the product didn’t catch fire.
Users didn't want to send crypto to their friends; they wanted to send dollars. If people wanted dollars, Allaire would give them dollars. Digital ones.
In 2018, Circle partnered with Coinbase to launch USD Coin (USDC) under a consortium called Centre. The timing was perfect. Tether dominated stablecoins but had serious transparency issues, nobody could verify if they actually held the dollars they claimed. Circle saw an opening for the boring, compliant alternative.
The Transparency Play
From day one, USDC’s value proposition was trust.
Circle promised that every USDC was fully backed by cash or U.S. Treasuries, held in reputable financial institutions, with regular attestations by a top accounting firm. This wasn’t just lip service. Circle became the first company to nab a coveted New York BitLicense (the strict crypto license) and secured state money transmitter licenses across the US. Each month, it published third-party reports confirming the reserve balances.
Distribution was the other key to USDC’s strategy. By teaming up with Coinbase (one of the largest crypto exchanges) as a co-founder of USDC, Circle immediately planted its coin into the arsenals of traders and crypto businesses. Exchanges, wallets, and fintech apps around the world found it easy to support USDC, knowing it was backed by reputable players.
This paid off when the DeFi boom hit. During the “DeFi Summer” of 2020-21, demand for stablecoins exploded as new decentralized lending and trading protocols let crypto users earn high yields on dollar liquidity. USDC’s circulation surged from a few hundred million to tens of billions of dollars. At one point in 2022, outstanding USDC neared $50 billion, up nearly 100x from two years prior.
The SVB Test
Yet being the “safe” stablecoin also meant living up to that reputation during crises. In March 2023, Circle faced its toughest trust crisis when Silicon Valley Bank collapsed virtually overnight.
$3.3 billion of USDC’s cash reserves (about 8%), which is used to back the USDC 1:1 with actual cash, were stuck in SVB. Panic ensued in crypto markets; USDC, which rarely budges from $1, de-pegged to ~$0.88 at one point.
Circle's response defined the company. Allaire's team worked through the weekend, publicly promising to cover any shortfall using Circle's own corporate funds. Circle put its balance sheet and credibility on the line to backstop USDC’s dollar peg. When US authorities eventually announced that SVB depositors would be made whole, confidence returned immediately. USDC snapped back to $1.00.
Still, the episode was harrowing. “No matter how sound Circle’s operations are, this sort of depeg tends to undermine confidence,” one market analyst noted at the time. For Circle, the SVB fiasco underscored both the importance and the challenge of being a trustworthy stablecoin issuer. It sparked Circle to further diversify its banking partners and lobby for clearer stablecoin regulations so that issuers might someday access central bank accounts directly (removing single-bank reliance).
Through the turmoil, Circle continued to double down on transparency. By 2024, the company was holding 85% of USDC’s reserves in a BlackRock-managed fund invested in short-term U.S. Treasuries (with the rest in cash at a network of banks for liquidity). This structure meant USDC’s backing was not only ultra-safe but visible daily (the fund publishes holdings each day).
Circle turned most of USDC’s reserves into a regulated money market fund custodied at BNY Mellon, a stark contrast to earlier stablecoin practices of spreading cash across sketchy offshore banks. The message: USDC is as solid as the dollars and T-bills behind it, and you can verify it anytime.
Going Public
Circle's 2025 IPO was the ultimate trust signal.
In a first for stablecoins, Circle decided to go fully public on the New York Stock Exchange, opening its books to the world.
Skeptics wondered if there’d be appetite for a “crypto” company so tied to regulatory goodwill. Those doubts were answered on IPO day, Circle priced at $31, valuing the company around $6.9 billion. Then the buying frenzy began. The NYSE halted trading multiple times as the stock rocketed past $80 on day one, hitting triple digits within 24 hours.
In an uncertain market, Wall Street was clamoring to buy a piece of the stablecoin future. As Simon Taylor put it, “Circle is the stablecoin stock. Where else do public investors go to get exposure to the stablecoin supercycle?”
For Circle, the successful IPO was validation on multiple levels. It provided a fresh $1+ billion capital infusion and credibility with institutional partners. More importantly, becoming a U.S. public company raised the bar for every stablecoin player. Circle now must undergo SEC reporting, quarterly audits, and the unforgiving transparency of public markets. This move is strategic: it’s meant to signal to risk-averse corporate treasurers and regulators that USDC is here to stay and play by the rules.
Circle’s CEO, Jeremy Allaire often said that trust is the product in financial services, with the IPO, Circle essentially bet that maximal transparency and compliance would become its moat.
Circle’s Primary Product — USDC
Circle's success rests on one primary product: USDC, the world's second-largest stablecoin. While the company offers various payment APIs and treasury services, USDC is the engine that drives everything else. It's both elegantly simple and quietly revolutionary, a digital dollar that works exactly like a dollar, just faster.
How USDC Actually Works
Here’s how it works. When you want USDC, you send Circle real dollars (Step 1). Circle takes those dollars and mints new USDC tokens in exchange (Step 2), while simultaneously depositing your dollars into segregated reserve accounts holding Treasury bills and cash (Step 3). When you want to cash out, the process reverses: Circle redeems your USDC tokens (Step 4), destroys them, and wires you back the equivalent dollars from reserves.
It's essentially a digital ledger for your dollars. Circle doesn't lend out your money or invest in risky assets, all reserves stay in ultra-safe Treasury bills and bank deposits. The company acts more like a narrow bank than a traditional financial institution, taking deposits in exchange for tokens rather than offering loans or complex financial products.
The Interest Income Engine
This simple model generates surprisingly robust revenues through what's essentially "float" income. All those billions sitting in Circle's reserves earn interest in Treasury bills and money market funds. When interest rates were near zero in the late 2010s, this was a sleepy business. But as the Federal Reserve hiked rates, it became a cash cow.
Circle's financials show the impact: Circle went from $15 million in revenue in 2020 to $1.7 billion in 2024. Out of that 2024 revenue, a staggering 99% came from interest earned on USDC's reserves. Circle primarily earns yield on customer deposits while providing them a valuable service (instant, global dollar transfers) rather than charging transaction fees.
By mid-2025, around $60 billion USDC were in circulation, generating significant interest income at current rates. Circle's lifetime transaction volume hit $20 trillion, with over 4.3 million unique wallets holding USDC, making it the second-largest stablecoin globally.
Business Model Alignment
Circle's incentives align perfectly with user needs: the company only makes money if people trust USDC and keep using it. Unlike traditional banks that profit from lending spreads and fees, Circle's revenue depends entirely on maintaining USDC's stability and utility. This creates powerful incentives for transparency, safety, and regulatory compliance, exactly what made USDC appealing in the first place.
A Tale of Two Stablecoins: Circle vs. Tether
It’s impossible to tell Circle’s story without comparing it to Tether, the elephant in the room. Tether’s USDT is the original stablecoin and still the largest by market cap. If USDC is the straight-laced, transparent stablecoin, USDT is its shadowy, but wildly successful cousin. The two embody diverging philosophies on governance and compliance.
Transparency: Open Books vs. Black Box
Circle operates like a traditional financial company, NYC/Boston headquarters, known executives, monthly audits from Grant Thornton, daily reserve reporting. Tether? For years, it was a black box run from Hong Kong/Caribbean with the same owners as Bitfinex exchange. When pressed for proof of reserves, Tether offered quarterly "trust us" snapshots. In 2021, New York's Attorney General found Tether had lied about backing and was temporarily under-reserved. The $18.5 million settlement wasn't exactly a clean bill of health.
Circle keeps 100% of reserves in cash and Treasuries with clear custodians. Tether's reserves have included commercial paper, short-term loans, and "other investments" of unknown quality. Circle structured most reserves as a regulated BlackRock money market fund. The contrast is stark: one runs like a regulated bank, the other like a "move fast, break things" startup.
Regulatory Strategy: Embrace vs. Evade
Circle courted regulation from day one, state licenses, KYC compliance, CEO testifying to Congress. Tether operated offshore specifically to avoid US oversight, becoming the lifeblood of unbanked crypto exchanges across Asia. USDT's dominant role grew from banking the unbankable, exchanges, and traders that couldn't access dollars.
Circle chose legitimacy over speed; Tether chose growth over transparency. By 2023, the Justice Department was reportedly probing Tether's compliance with banking laws. Circle is betting that trust becomes a competitive advantage as stablecoins go mainstream.
Tether's approach hasn't "failed"—USDT still exceeds USDC's market cap and hits new highs regularly. But Circle is betting that trust becomes a competitive advantage as stablecoins go mainstream. Corporate treasurers want the boring, compliant option. Tether filled a vacuum when banks shunned crypto, Circle is building for when banks embrace it.
Risks and the Road Ahead
Despite their promise, stablecoins (and Circle in particular) face plenty of risks and open questions. A few loom large:
Dependence on Interest Rates
Circle's business model is deceptively simple and dangerously concentrated. In 2024, 99% of its $1.68 billion revenue came from interest earned on USDC reserves. The company went from $15 million in revenue in 2020 to $1.7 billion in 2024, a huge factor being the rise in interest rates.
That cuts both ways. If rates drop to near-zero or USDC circulation shrinks in a crypto winter, Circle's revenue could collapse just as dramatically. One investor mentioned that buying Circle stock is "a bet on Fed policy as much as crypto adoption." Circle is trying to diversify into payment services and treasury management, but for now it's a leveraged play on interest rates and stablecoin demand.
Regulatory and Competitive Pressures
Governments are waking up to the fact that hundreds of billions in quasi-deposits now sit outside traditional banks via stablecoins. Draft US legislation like the GENIUS and STABLE Act would put stablecoin issuers under federal oversight, potentially imposing stricter capital requirements or prohibiting interest payments to users. Circle supports regulation, but final rules could still prove onerous.
The bigger threat might be Central Bank Digital Currencies (CBDC). If major central banks launch well-designed digital dollars, the market for private stablecoins could shrink significantly. Circle argues USDC will coexist with CBDCs, but that's easier to say than guarantee.
Meanwhile, the stablecoin itself risks commoditization. USDC's core features, dollar backing, fast transfers, developer APIs can be easily copied. PayPal USD launched with a massive user base. Bank-issued tokenized money market funds could offer yield while maintaining stability. As Circle admits in its IPO filings, "yield-bearing digital assets may reduce market demand for Circle stablecoins" if holders decide passive returns beat zero-yield stability.
Operational Fragility
Even with 100% backing, stablecoins aren't risk-free. A cyber breach, smart contract bug, or banking partner failure could trigger a crisis of confidence. Circle's nightmare scenario is a sudden run, everyone redeeming simultaneously, forcing mass liquidation of Treasury bills. The SVB episode proved this isn't theoretical.
So far, Circle has met every redemption 1-for-1. But as the market grows, maintaining seamless convertibility under extreme stress becomes harder. One "breaking the buck" moment could destroy years of trust-building overnight.
Through all these challenges, stablecoins aren't going away. They have firmly entrenched themselves as a cornerstone of digital finance. Circle’s CFO likens stablecoins to the internet for value – an always-on network that will eventually feel as banal and essential as email. That vision is shared by many technologists and, increasingly, by wary bankers who realize the train is leaving the station.
The Future?
The same CFO closes her laptop, but she hasn't checked a wire transfer status in months. Her $5 million payment to London? Settled while she grabbed coffee. The blockchain dashboard that once felt futuristic now seems as mundane as email.
Money finally moves like data.
But as she authorizes another instant payment, she pauses. Which currency will her company use in five years? The USDC she's sending might be upstaged by JPMorgan's tokens, the Fed's digital dollar, or something not yet invented.
She remembers when moving money meant navigating correspondent banks and waiting days for settlement. Now it means choosing between competing digital rails, each promising instant transfers and transparent reserves. Circle's bet on radical transparency paid off, but only because they moved first.
The revolution isn't that money moves faster. It's that we finally have choices in how it moves, and who moves it.