Coinbase Benefits Significantly from Circle’s IPO, Earning Annual Reserve Income with Potential Fivefold Returns on Shareholding

04/02/2025

Stablecoin USDC Issuer Circle Officially Submits IPO Documents to the SEC

Stablecoin USDC issuer Circle has officially submitted IPO documents to the U.S. Securities and Exchange Commission (SEC), planning to list on the New York Stock Exchange (NYSE) under the ticker symbol “CRCL” by the end of April. Can Coinbase, the exchange that has long collaborated with Circle, reap significant profits from this?

(Circle Officially Submits IPO Listing Documents, Financial Pressure Beneath Burn Rate Business Model)

Long-term Collaboration Between Coinbase and Circle

For a long time, USDC has held the position of the second-largest stablecoin by market capitalization. It is governed by the Center Consortium, a partnership formed in 2018 between Circle and cryptocurrency exchange Coinbase.

The Center Consortium, jointly managed by Circle and Coinbase for the issuance of USDC, officially announced its conclusion in August 2023. At that time, reports indicated that Circle and Coinbase believed that as regulations surrounding stablecoins became clearer in the U.S. and around the world, the necessity for independent governance bodies like Centre was no longer an issue. Circle will continue to act as the issuer of USDC, integrating the governance and operational responsibilities of the Center internally. The new structure will streamline operations and governance, enhancing Circle’s direct responsibilities as the issuer, including holding all smart contract keys, complying with reserve governance regulations, and enabling USDC on new blockchains.

Coinbase Holds 3.5% Equity in Circle

At that time, Coinbase and Circle reached a new agreement, where Coinbase continued its stablecoin collaboration with Circle through the acquisition of equity in Circle. This also reflected Coinbase’s conviction in the fundamental importance of stablecoins to the broader crypto economy.

According to the document, Circle issued 8,367,442 shares of common stock valued at $209.9 million in August 2023 as part of the consideration for the acquisition of the remaining 50% equity in the Centre Consortium.

Cross-referencing with Coinbase’s 2023 annual report, we find that in August 2023, Coinbase exchanged its original 50% equity in Centre for equity in Circle Internet Financial Limited, amounting to 3.5% on a fully diluted basis.

Coinbase to Profit Significantly After Circle’s IPO

Bloomberg cited data from PitchBook indicating that Circle’s valuation reached $7.7 billion after a round of financing in 2022. The company secretly filed for an IPO in early 2024, which would boost its valuation to $9 billion.

Coinbase’s financial report indicated that the fair value of the exchanged shares was $51.1 million. If viewed as Coinbase’s investment cost in Circle, then:

Valuation of $7.7 billion: Coinbase’s share is $270 million, yielding a profit of $218.9 million, with a return on investment (ROI) of 428%.
Valuation of $9 billion: Coinbase’s share is $315 million, yielding a profit of $263.9 million, with an ROI of 516%.

Receiving Nearly 50% of Circle’s Reserve Income Annually

Additionally, Coinbase receives an annual share of USDC reserve promotion fees from Circle as follows:

2024: $908 million, accounting for 55% of Circle’s reserve income.
2023: $691 million, accounting for 48% of Circle’s reserve income.
2022: $248 million, accounting for 34% of Circle’s reserve income.

It seems that Coinbase’s earnings and return rates from Circle are quite impressive!

Risk Warning

Investing in cryptocurrencies carries a high level of risk, and prices can be highly volatile, which may result in the loss of your entire principal. Please evaluate risks carefully.