"$CRCL: The Future is More Than Just a Spread Company"
Combining my previous articles (visit http://dayu.XYZ where I have compiled articles on CRCL), along with the recent comments from the SEC chairman about the on-chain transition of US stocks within two years and the approval received by DTCC, it seems that everyone has generally accepted the idea that USDC could reach a scale of $3-5 trillion. However:
Is CRCL's business model solely about earning interest spreads?
While the answer seems obvious to me, as part of this educational series, I will elaborate. First, the answer: Absolutely not!
The scale of USDC will become the largest stablecoin in the compliant era, surpassing non-compliant stablecoins, serving as the second growth curve for the dollar and U.S. Treasuries. When these prerequisites are met, several revenue streams are likely to experience tremendous growth.
1. On-chain SWIFT + VISA
Currently, when we cross-chain USDC across various chains, the most commonly used method is CIRCLE's built-in CCTP, which is the official native cross-chain solution, offering security that surpasses all current cross-chain options. In the future, cross-chain interactions and protocol integrations will utilize it.
When the scale of USDC reaches $3 trillion, hundreds of billions will move on-chain daily. Assuming $100 billion moves, even charging a fee of 0.01 will result in a significant scale.
Circle is already building the Circle Payment Network, which is essentially a B2B settlement network: cross-border B2B payments, cross-border payroll, supply chain settlements, and the backend clearing layer for platform enterprises (e-commerce, payment companies).
This is also a highly probable business model, which includes a fee structure similar to VISA's, along with interface fees, which will be an important supplement to interest income.
2. On-chain Foreign Exchange Trading
CIRCLE not only has USDC but also compliant on-chain euros, and in the future, there will be yen and pounds.
The foreign exchange market is the largest financial market globally, with a daily trading volume of $7.5 trillion. As an issuer, it naturally has the deepest liquidity pool, earning only a small spread, which could yield returns exceeding U.S. Treasury interest!
3. Enterprise-level Services
Any enterprise, wallet, or developer platform can currently directly use CIRCLE's Programmable Wallets service for integration, allowing immediate access to compliant stablecoin solutions. They can also utilize its Web3 Services, which provide a complete set of APIs for wallets, contract deployment, gas abstraction, and more.
When USDC becomes the on-chain dollar standard, all wallets/apps/games/NFTs/DeFi that want to integrate dollar payments will be motivated to adopt Circle's wallet services, as that is the official and most straightforward path.
4. Asset Management
Currently, Circle has partnered with BlackRock to create a USYC: an on-chain government bond fund, which will further expand in scale. Circle provides issuance, settlement, transfer, and wallet infrastructure, taking a portion of management fees/platform fees.
They offer BlackRock a comprehensive "fund tokenization infrastructure + compliant wallet + USDC settlement," charging platform usage fees and transaction-based fees.
5. ARC High-Speed Toll Fees
Arc's positioning: an L1 designed for stablecoin payments, natively supporting: near-instant cross-border payments, tokenized securities, government bonds, commodities, and a perpetual contract market for stablecoin trading pairs.
Revenue typically comes from three sources, including gas fees (not guaranteed), fees for validators, and MEV earnings.
ARC is likely to be the preferred chain for institutions, whether it's DTCC or JPMorgan, as those involved in significant settlements will likely use ARC instead of BASE.
6. Identity Infrastructure
The more countries and chains USDC covers, the more it naturally controls the most on-chain dollar liquidity data. Thus, it can charge different institutions for all this liquidity and data, such as compliance modules for banks and brokerages; risk control/API for trading platforms and market makers; and market data products for funds and quant firms.
This low marginal cost is easy for CIRCLE to implement, but the potential revenue could be substantial, especially in compliance. Even in the crypto exchange sector, the costs associated with compliance are enormous, as seen with exchanges like HASHKEY, where the bulk of expenses are compliance-related. As USDC grows larger, others won't need to handle compliance anymore and can directly use its rules—CIRCLE's own compliance costs become a product that can be sold in unlimited quantities.
Therefore, in the future, interest income is likely to drop below 50%. Assuming a stablecoin scale of $1 trillion, with an interest rate of 3%, the interest spread income would be $30 billion per year, with other income also at $30 billion per year, and operational and distribution costs estimated at $20 billion, resulting in a net profit of $40 billion plus monopoly leadership. Thus, based on a PE of 30, its market value would be $1.2 trillion.
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