Circle tops revenue expectations on strong stablecoin circulation, shares soar

By Utkarsh Shetti

Feb 25 (Reuters) - Circle ‌surpassed Wall Street ​expectations ​for fourth-quarter revenue on Wednesday, as income from reserves got a boost from a rise in circulation of its stablecoin token, sending its shares ‌up nearly 30% in afternoon trading.

USDC, Circle's primary stablecoin, is seeing ⁠a surge in adoption as favorable regulations such as the GENIUS Act, which was signed into law ‌by U.S. President Donald Trump ‌last year, establish a federal framework for dollar-pegged stablecoins.

The token is pegged to the U.S. dollar, backed by reserves of cash and other low-risk assets that tether ​its market price close to the benchmark of $1.

Circulation of USDC rose 72% from a year earlier to $75.3 billion in the fourth quarter, lifting total revenue from ⁠reserves to $733 million.

"The key takeaway is that USDC continues scaling rapidly, at a pace that's far outweighing impacts from ​rates. Circle also is becoming increasingly profitable over time," Seaport Research Partners analyst Jeff Cantwell said.

RATE CUTS 'WELCOME'

Circle invests the cash received for ​its issued tokens in deposits and short-dated U.S. ‌treasuries, pocketing the yield. Its income is therefore highly sensitive to the Federal Reserve's interest rate actions.

Further cuts this year are "welcome" ⁠as they would create an environment that enables more investment and a boost in circulation, CEO Jeremy Allaire told Reuters in an interview.

"High rates, while, in theory, generate more revenue for ⁠us, they really slow down the velocity of money in the economy, and so our view is ​that as rates fall, that's going to drive more adoption and growth," Allaire said.

Circle received conditional approval to establish a national trust bank charter in December, a major move that could further ‌integrate digital assets into the banking system.

It recently struck key partnerships, including with payments giant Visa, allowing U.S. institutions to settle ‌transactions using USDC. Circle has also positioned itself in the prediction markets through a tie-up ⁠with Polymarket.

Total revenue and reserve income ‌rose 77% to $770 million, ​beating the analysts' average estimate of $739 million, according to data compiled by LSEG.

(Reporting by Utkarsh Shetti in Bengaluru Editing by Anil D'Silva and ‌Alan Barona)

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