Circle Reported 17% Revenue Growth, but $182 Million Came From Selling a New Token. Is USDC’s Core Business Shrinking?

Circle Internet Group (NYSE: CRCL | CRCL Price Prediction) announced its third-quarter earnings, reporting revenue and reserve income of $865 million, up 17% from the same quarter last year.

However, $182 million of this revenue came from the sale of ARC (CRYPTO: ARC), the native token associated with its newly launched Arc blockchain. Meanwhile, reserve income—essentially the interest Circle earns on the cash and short-term government securities backing USD Coin (CRYPTO: USDC)—fell 8% to $658 million. This raises the question: Are USDC’s core business operations shrinking?

After the report, Circle’s stock rose to $77, up 1.9% in mid-morning trading on November 4, 2026, though shares are still down 35% year over year. USDC maintained its $1 peg, so a key indicator for USDC holders will be how much they and businesses choose to keep.

Circle Still Earns Most of Its Money on USDC Reserves

Every USDC is backed by cash and short-term government debt, all held under federal oversight. Circle earns interest from these reserves, making this reserve income the largest part of its revenue. This income depends on how much USDC is in circulation and how well the reserves perform.

In the third quarter, the average amount of USDC in circulation rose by 8% to $73.3 billion. However, the return rate on those reserves fell by 61 basis points, or 0.61 percentage points, to 3.54%. Management said this rate decline outweighed the increase in circulation.

On a positive note, interest rates have started to improve, with the reserve rate rising by 6 basis points from the second quarter following the Federal Reserve’s rate hike in September. As of November 3, the yield on 3-month Treasury bills was 4.21%. However, a significant portion of that interest is distributed to partners, like exchanges, for holding and promoting USDC.

Circle’s net reserve margin—the portion it retains after paying those partners—fell about 80 basis points from the previous quarter to 37.8%. This decrease largely reflects the full-quarter impact of its Hyperliquid partnership.

Circle’s ARC Token Sale Propped Up Its Other Revenue

Circle’s total other revenue reached $207 million this quarter, but excluding the ARC token sale, it was only $25 million, down 11% year over year. The Arc blockchain was launched on September 16, with an initial supply of 10 billion ARC tokens, and Circle began selling these tokens to investors before the launch, counting the proceeds as revenue once certain milestones were reached.

Jeremy Fox-Geen, Circle’s CFO, who has announced his departure, said the company recognized around 75% of the $242 million presale revenue this quarter. However, Circle also cautioned that it may have to repay some funds if Arc fails to meet its future milestones.

The company also reduced its workforce by about 5% and maintained a forecast of $310 million to $330 million in other revenue for the full year, while net income from continuing operations grew 5% to $226 million.

USDC Supply Stalls as Tether Gains Market Share

Although average USDC circulation rose 100% from last year in Q4 2025, it then slowed to 39%, 25%, and finally 8% in the three quarters of 2026. Average circulation in Q3 even fell 4% from the previous quarter’s peak, with USDC closing the quarter at $73.9 billion—unchanged from a year ago.

In contrast, total stablecoin supply grew 8% to about $274 billion, so USDC’s market share fell 183 basis points to 27%, with most of that share going to Tether (CRYPTO: USDT).

Circle CEO Jeremy Allaire emphasized usage over balances. He pointed out that while balances remained steady, usage continued to increase, with USDC accounting for 79% of all stablecoin transaction volume—up from 66% the previous year. On-chain transaction volume surged 49% to reach $13.9 trillion. However, because Circle’s largest revenue source relies on balances held, quicker turnover without significant balance growth does not enhance reserve income.

Circle’s New Deals Name USDC but Do Not Require It

Circle recently signed a five-year agreement with Binance, which also made a $100 million equity investment. However, the financial details of this partnership remain undisclosed. The fourth quarter includes the deal’s first full quarter, so partner payments may rise before any gains in circulation show up.

Additionally, Circle agreed to acquire Tazapay, a cross-border payments platform boasting over $25 billion in annualized volume, for $400 million in stock. However, it remains unclear how much of this volume is conducted using USDC. Visa (NYSE: V) has begun utilizing USDC for stablecoin prefunding across over 180 countries, while Samsung Wallet allows U.S. Galaxy users to send USDC to banks in over 60 countries, but neither has specified a minimum volume.

Arc provides the most direct USDC integration, as fees on that network are charged in USDC. As of late October, approximately $1.5 billion in USDC and other tokens was held on the Arc platform.

Do Circle’s Third-Quarter Earnings Show USDC’s Core Business Shrinking?

The numbers suggest a decline. Reserve income fell 8%, and other revenue outside the ARC token sale fell 11%. As a result, all of Circle’s revenue streams except for the ARC presale decreased compared to the previous year. While partnerships and new initiatives may offer growth potential, the earnings report raises concerns about the health of USDC’s core business.

Fourth-quarter average circulation is the key figure, as growth below 8% or share under 27% could extend the decline, while a rebound toward $76.5 billion could signal a pause before the GENIUS Act starts in January 2027.

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