The first time I heard the name “Circle” was from a certain comment on a Hive post probably 2-3 years ago. Of course, I can no longer recall what post that was, but I'm certain it had something to do with stablecoins, obviously.
The comment was more of a referral to read about Circle and its plans to centralized crypto — something like that, if memory serves me right.
While I don't recall doing much reading into it, I do recall watching one video, that was rather extremely long and a phrase that stuck out, amongst everything that was said was “Centre Consortium” and this is the reason for this little backstory on discovery Circle.
Now what's so special about the Centre Consortium that I had to talk about an event I can't actually prove?
You see, Centre Consortium was a joint venture founded by Circle and Coinbase in 2018.
To quote the announcement at the time, word for word, Centre Consortium was “aimed at establishing a standard for fiat on the internet and providing a governance framework and network for the global, mainstream adoption of fiat stablecoins.”
The partnership positioned Circle and Coinbase at a 50/50 control over USDC issuance, and profits from interest earned on deposited USD for the tokenized stablecoin, USDC, were to be shared between both parties.
Before I continue, I'd like to point out that USDC is the second largest stablecoin by market capitalization and 7th most valuable cryptocurrency by the same metric.
At the time of writing, this is approximately $60.30B, which is about 41.87% of what USDT is valued at, by market capitalization.
USDT being the largest stablecoin by market capitalization is valued at $144.01B and Tether, the company behind USDT, has a net reported profits of $13B. Certainly, one would expect that Circle would come as close to the percentage market value, in comparison, no?
Coinbase makes $908 million off USDC
The Centre Consortium was dissolved in 2023 and Circle became the sole company in charge of USDC issuance.
Coinbase also made an equity investment in Circle, to which the sum was not disclosed but recent SEC filing reveals that Coinbase may have just about a great deal of crawls in Circle, and essentially USDC.
Now, initially, we never really got to know how exactly the Centre Consortium was dissolved, this was all we knew at the time:
Centre Consortium, which issues second-largest stablecoin USDC, has been dissolved as Coinbase acquires a minority share in Circle Internet Financial, according to a blog post from the company.
"Centre will no longer exist as a stand-alone entity and Circle will remain as the issuer of USDC, bringing any Centre governance and operations responsibilities in-house," Circle CEO Jeremy Allaire and Coinbase CEO Brian Armstrong said in a jointly-authored blog post. The announcement added that revenue from interest earned on the dollar reserves backing USDC tokens will continue to be shared between the two firms, but the split will now be equal.
The report by Decrypt shows that the agreement was a 50/50 split of revenue earned, as seen above, so how is it that Coinbase walks away with more money at the end of the day?
What the filing with the SEC shows is that the dissolving of the Centre Consortium involved a purchase of Coinbase’s 50% equity stake in the venture via a $209.9M worth of common shares, about 8.4M, by Circle l.
Recall that Coinbase already acquired an undisclosed amount of equity stake in 2023, during the dissolvement of the Centre Consortium. So not only does it have that, it also has 8.4 million common stock of Circle.
When it comes to the hard numbers, Coinbase made $908 million from USDC in 2024, while Circle made $155.6 million in net income. In comparison to USDT, these are terrible numbers, even when we look at the overall revenue being $1.67 billion, according to the Cointelegraph report.
This is merely 12.9% of Tether’s net profits of $13 billion.
Circle’s performance is quite laughable in comparison and it's unclear what going public would do for the company.
That said, this whole development seemed more like marketing for Coinbase as judging by the reaction from crypto enthusiasts, people didn't quite understand how much money the publicly traded US crypto exchange was making and its general influence in major projects.
It sort of reminds of Ethereum, which Coinbase has a huge influence in, similarly to Circle and yes, also most likely makes more money from it than anyone else. Coinbase makes up what I call the big 5 powers controlling Ethereum, you can find the article here.
The race to dominate the cryptocurrency ecosystem via stablecoins with traditional capital backings has begun. It should be obvious by now what's to come with big names like this already holding positions that control an insane sum of value flow.
There's no more crucial time than now for decentralized stablecoins to step up because if centralized stablecoins like USDT and USDC continue to expand with no decentralized alternatives with reasonable adoption, the ecosystem will be largely exposed to centralized market manipulations.