Circle’s revenue and reserve income in the second quarter of 2026 was $701 million. Its distribution and transaction costs were $410 million, leaving operating profit of just $34.4 million.

On September 17, Binance subscribed to $100 million of newly issued Circle Class A common stock and signed a five-year USDC promotion agreement.

Stablecoin issuers earn yield on reserve assets, but how much of that yield they ultimately retain increasingly depends on who controls user balances.

What issuers are really buying is balances

The model itself is simple. Users exchange dollars for USDC; Circle uses those dollars to buy short-term U.S. Treasuries and cash-like assets; the yield on the reserves first goes to Circle and is then distributed under partnership agreements with different channels. By one estimate, reserve income accounted for 95.2% of Circle’s total revenue in the second quarter.

Circle does not itself pay this reserve yield to USDC holders, but intermediary platforms can return part of it to users through rewards and similar programs. Federal law restricts issuers from paying interest, but it does not close off the space for rewards distributed through intermediaries such as exchanges.

Circle’s core revenue depends on two variables: average USDC balances and reserve yields. Yet those balances sit with exchanges, wallets, and payment platforms. Since issuers cannot directly pay holders income associated with holding, Circle relies more heavily on balance incentives for channels to keep more USDC on those platforms. That spending already equals 59% of total revenue. It becomes more painful when rates fall: reserve yields dropped from 4.14% to 3.48%; average circulation rose 25%; but reserve income rose only 5%. Circle’s sensitivity analysis shows that for every 100-basis-point change in yields, reserve income over the next 12 months changes by roughly $737 million, while distribution and transaction costs change by about $360 million in tandem. In other words, part of the loss from lower rates is offset by lower channel sharing, but roughly $377 million of gross-revenue shortfall still remains on Circle’s side.

Leading channels take nearly half of revenue

The precedent for this model is the U.S. exchange Coinbase.

Under an agreement signed in 2023, Coinbase does not simply take all reserve interest. Circle first retains its issuer portion, then allocates the corresponding platform economics based on USDC balances across the two platforms; after amounts paid to other ecosystem participants are deducted, Coinbase can also receive 50% of the remaining payment base. In 2024, Circle’s Coinbase-related distribution costs reached approximately $908 million. Coinbase also obtained an equity stake in Circle. In the second quarter, $324.6 million in distribution costs was related to Coinbase—nearly 80% of all distribution and transaction costs. After deducting that amount, the remaining roughly $86 million also included distribution costs for other channels and transaction-related costs.

The more concentrated the balances, the stronger the channel. USDC held on Coinbase rose from about 5% of circulating supply in 2022 to roughly 20% in 2024, and revenue sharing accordingly became Circle’s largest expense.

In August, Circle and Coinbase extended their existing relationship through 2029. But two months earlier, Coinbase had become one of the founding members of the Open USD (OUSD) alliance, and Circle’s share price fell more than 17% on the day the news was announced. From a commercial-negotiation perspective, Open USD at least gives Coinbase a potential alternative.

Binance takes an equity stake

Binance copied Coinbase’s template, with one change.

In November 2024, Circle first paid Binance a one-time fee of $60.3 million, then paid monthly incentives based on USDC balances on Binance’s platform and in its treasury. In August 2025, the partnership expanded to modular wallet services, also paid according to balances. Circle’s annual report shows that Binance-related distribution costs in 2025 were $152.1 million higher than in 2024. In both versions, money moved in only one direction: Circle paid Binance.

In the September version, money began moving in the opposite direction. Binance subscribed for 1,237,011 shares of Circle Class A common stock at $80.84 per share, about 5% below the September 17 closing price, implying a discount of roughly $5.3 million. This was a private placement: the shares cannot be sold, pledged, or hedged for two years, while voting rights are retained.

Circle received $100 million in cash, but the more notable point is Binance’s two streams of returns. The monthly incentive was not cancelled; it is still calculated on USDC balances held through Circle’s modular smart-contract wallet, though the specific rate has not been disclosed. With the newly purchased shares, Binance’s return is no longer limited to USDC balance sharing; it is also tied to Circle’s operations and share price. The channel has gone from supplier to shareholder.

The agreement focuses on emerging markets. The new agreement between the two parties centers on expanding USDC use in emerging markets. CNBC’s interpretation is that this allows USDC to compete more directly with Tether internationally; for Circle, it also means it no longer has to rely solely on Coinbase as a channel.

Subsidies buy incremental balances

What channel subsidies are really intended to buy is incremental balances, not traffic.

If Binance users switch from other stablecoins to USDC, Circle’s overall scale expands and the revenue sharing is worthwhile. If existing USDC simply moves from elsewhere to Binance, Circle pays money while the total stays unchanged; that is only income redistribution, not revenue growth.

The second-quarter figures look closer to the latter case: USDC circulation fell from $77 billion at the end of March to $73.3 billion, while distribution costs still rose 1% year over year. Buying channels while the total supply contracts looks more like competing for an existing pool.

Circle’s response has two layers. First, the share lockup and five-year term tie Binance’s returns to USDC’s long-term performance, though the agreement also states that Binance may terminate the partnership early under specified circumstances, in which case the share restrictions may also end early. Second, Circle is pushing balances into places where it can retain more revenue: Circle’s Arc public blockchain launched on mainnet on September 16, and Binance completed its integration and opened deposits the same day. Arc offers a revenue path different from USDC reserve income, but it has not yet reached a scale comparable to reserve income in the financial statements.

Concessions written into the product rules

USDC revenue sharing is negotiated one-to-one between Circle and each channel, and Binance’s rate has still not been disclosed. Later issuers do not have that negotiating foundation; their approach is to write the concession into the product from the outset and tell channels how much they can receive.

Paxos-issued USDG was ahead of the curve. At launch, Paxos said it would return nearly all rewards to participants. Its network now has more than 150 partners and more than $3 billion in circulation. Brokerage firm Robinhood chose it as the native stablecoin for its own chain, where it accounts for 68% of the on-chain stablecoin supply; executives’ rationale was who gets the money. USDG itself does not pay interest to holders; whether to pass it on to users is up to each platform.

Decentralized perpetuals platform Hyperliquid makes channels’ bargaining power especially clear. Before USDH launched, the stablecoin supply on Hyperliquid had long been dominated by USDC, with Circle capturing most of the reserve yield. USDH’s central selling point was to keep part of those economic returns inside the Hyperliquid ecosystem. In September 2025, Hyperliquid used a validator vote to choose its own stablecoin issuer. Native Markets committed only 50% of the yield to HYPE buybacks and the other 50% to the ecosystem, while rivals Paxos and Ethena quoted revenue shares of about 95%, yet Native Markets was still selected.

In May 2026, Coinbase acquired the USDH brand assets. USDH holders could exchange 1:1 for USDC, making USDC Hyperliquid’s main collateral and trading asset. According to reports, Coinbase will share most of the reserve yield from those USDC balances with the Hyperliquid protocol. The balances returned to USDC, but they can only be retained by sharing yield with the platform. Public information does not explain how much Circle itself can retain.

The largest attempt is Open USD. On June 30, more than 140 companies announced its launch, led by Zach Abrams, co-founder of Stripe-owned Bridge; participants included Visa, Mastercard, BlackRock, and Coinbase. Reserve yields are distributed to participating companies, with only a management fee retained. It has not yet launched, and the official sources have not yet disclosed details such as the specific legal issuing entity or the complete fee formula. Stripe has said it wants it to become the default stablecoin for businesses transacting on Stripe, while Coinbase says it will bring it to chains including Base. CoinShares’ analysis notes that Circle currently treats revenue sharing as a negotiable expense, whereas OUSD seeks to turn it into a default entitlement for all partners.

This allocation model has a constraint: the more that is distributed, the less the issuer retains. Lorenzo Valente, director of research at ARK Invest, worries that OUSD’s fee model is too thin to leave enough money to subsidize the ecosystem as Circle once did. The largest issuer, Tether, is a different case: USDT circulation is $184.6 billion, accounting for more than 60% of the stablecoin market, and second-quarter net operating profit was about $1.5 billion. A player with a scale lead has less need to trade concessions for position.

Channels simply issue their own coins

Take the model one step further, and channels no longer wait for others to share revenue.

Open Issuance, a platform launched by Stripe-owned Bridge, allows any company to issue its own stablecoin, manage reserves, and receive reserve yield directly. Issuance can be completed in days, while Bridge handles reserve management, security, and compliance. Phantom wallet’s CASH and MetaMask’s mUSD are both built on this platform.

Can channel money flow to users?

Current rules already restrict issuers from directly paying interest or yield related to holding stablecoins. But economic sharing between issuers and channels—and whether channels can further return part of that income to users as rewards—remain key issues in upcoming regulatory and legislative debates.

A bipartisan negotiation draft released in May sought to ban returns that are economically or functionally equivalent to bank-deposit interest for holding stablecoins, while leaving room for rewards tied to specified transactions and activities such as payments and transfers. Banks argue that it is still not strict enough: the American Bankers Association (ABA) and others want to close the loophole that allows digital-asset service providers to circumvent the interest-payment ban; the Bank Policy Institute (BPI) wants tighter restrictions on interest-like rewards for holding stablecoins, while saying certain rewards tied to payment activity can exist. In mid-September, eight banking groups again jointly called for tighter restrictions.

On September 15, the Senate failed 49 to 50 to pass the procedural vote needed to advance the CLARITY Act. No specific timetable for the next effort to advance the bill has been announced.

This debate determines how much the money in channels’ hands is worth. If interest-like rewards paid based on held balances are banned, exchanges cannot use interest to share revenue with users, and the sharing they receive from issuers becomes the final layer of returns in this business. If it is allowed, channels may give part of it to users to compete for balances, shifting competition from “who gives channels more” to “who gives both channels and users more.”

Over the past several years, the proportions of stablecoin reserve yield retained by issuers, paid to channels, and ultimately passed to holders have continued to change. The first two portions already carry different prices: Coinbase participates in reserve-yield allocation according to balances and ecosystem scale; Binance receives balance incentives while also becoming a Circle shareholder; USDG, USDH, and Open USD write higher shares of reserve yield directly into their channel or ecosystem economics.

What has not yet been priced is the final portion—the holder’s return. Current rules restrict issuers from directly paying holders interest or yield related to holding, while whether channels can turn their own economic returns into user rewards still depends on subsequent legislation and regulatory rules.

Issuing a stablecoin is not the same as controlling the profit. What is truly valuable is the balance, the user entry point, and the power to distribute reserve yield. The reserve assets corresponding to the USDC you keep on a platform generate yield every day; who receives that money first now, and whether it can flow to you next, remains an unresolved contest over how value is divided.

  • This article is for reference only and does not constitute investment advice. Markets involve risk; invest with caution.