Source: Fintech Blueprint

Compilation and Organization: BitpushNews

Yesterday, the U.S. SEC disclosed the latest quarterly 13F holdings report. Dubbed the "Buffett of China," Duan Yongping significantly adjusted the holdings of H&H International Investment LLC, a family wealth and charitable fund account with over 20 billion dollars in assets under management — for the first time ever establishing a position in the compliant stablecoin giant Circle (NASDAQ: CRCL), with a position valued at 19.08 million dollars.

As a steadfast value investor, Duan Yongping rose to fame for heavily investing in Apple and Kweichow Moutai, adhering to an investment philosophy of "not investing in what you do not understand." This establishment of a position in Circle not only signifies a formal acknowledgment of traditional capital towards Web3 compliant assets. This article will deeply analyze Circle's Q1 performance and the latest product layout, examining whether this stablecoin giant can complete a pivot from an "interest-driven" to an "infrastructure" business model through the reconstruction of its underlying architecture.

Here is the main content:

Circle has had a busy week.

With the release of its Q1 2026 performance — total revenue and reserve interest income nearing 700 million dollars (a year-on-year increase of 20%), USDC supply reaching 77 billion dollars, and on-chain transaction volume reaching 21.5 trillion dollars — the company has also announced two major product updates and completed a token presale of 222 million dollars.

Changing the Tag of "Interest Voucher"

For a long time, Circle has been labeled as an "interest proxy tool": 99% of its 2024 revenue comes from the interest earned on USDC reserve assets.

This makes the business extremely sensitive to rate cycles, leaving equity investors with almost no other valuation pricing basis beyond the interest income and USDC issuance growth. The Arc (its Layer-1 blockchain), Circle Agent Stack (agent technology stack), and Payments Network are Circle's concentrated attempts to change this status quo — aiming to diversify revenue and let the stock valuation logic shift from "earnings multiples" to "underlying architecture multiples."

Perhaps the most unusual aspect is: Circle, as a publicly listed company with a traditional equity structure, managed to raise 222 million dollars for its focus on stablecoin's new Layer-1 blockchain through a token presale, achieving a fully diluted valuation (FDV) of 3 billion dollars.

In the financial sector, some tools enter the conventional shareholder register (Cap Table), while others are tokens directed at specific protocols. Notably, Coinbase's Ethereum Layer-2 network Base has yet to issue any tokens. This means that a publicly traded company worth billions can conduct such a token financing, signaling that token assets have officially landed on Wall Street.

This round of financing was led by Andreessen Horowitz (a16z), with a commitment of 75 million dollars, and also included BlackRock and Apollo. The presale comes with a multi-year lock-up period; if Arc Network fails to meet key milestones, investors retain rights to repayment.

Circle holds 25% of the initial token supply of 10 billion, while 60% is allocated to network participants, and 15% is reserved as long-term reserves. The Arc mainnet is expected to launch in the summer of 2026, and as of early May, its testnet has processed 244 million transactions.

Currently, the utility of the ARC token is still exploratory. This means that even without well-designed token economics, you can still raise over 200 million dollars today. Moreover, if we observe closely, we will find that building a Layer-1 blockchain does not actually require 200 million dollars.

Alongside the Arc launch, Circle also announced the Circle Agent Stack — a toolkit for developers to create "AI agents that transact using USDC," comprising wallets, a marketplace, and a nanopayment layer that supports transactions as low as 0.000001 dollars.

In doing so, the company joins the ranks of Stripe, Coinbase, Visa, Mastercard, Shopify, Fiserv, and Brex, all of whom are engaged in the "banking services for robots" race.

Arc is a Defensive Battle

Currently, USDC operates across dozens of public chains and wallets such as Ethereum and Solana. Circle can earn interest income from all these reserve assets. But the question is, how much of this income can it keep?

According to the 2023 Collaboration Agreement signed with Coinbase (this agreement was signed during the dissolution of the Centre consortium when Coinbase, as Circle's largest distribution channel, had a significant negotiating advantage), the distribution of reserve interest income is divided into three steps:

• Circle first extracts a small issuer fee at the top level.
• Then, based on the proportion of USDC held in their respective custodial products, both parties receive their respective share of the reserve interest income.
• As for the remaining profits — Coinbase takes away 50% directly.

The result is that even if some USDC has no custodial relationship with Coinbase, Coinbase can still siphon off some reserve interest income.

In 2024, out of Circle's total revenue of 1.68 billion dollars, as much as 908 million dollars was handed to Coinbase. This agreement automatically renews every three years, and Circle has no unilateral right to withdraw. Therefore, Arc is, to some extent, Circle's effort to build an underlying architecture that it fully controls and from which it can earn fees directly.

Again, it is worth emphasizing: Coinbase enjoys a half "net shearing right" over almost all of Circle's income, and Circle has no way to escape besides seeking a smart "backdoor."

The customer acquisition logic of Arc is very straightforward: a Layer-1 blockchain built for stablecoin-native finance. It uses USDC as the gas (fuel) token, featuring sub-second transaction finality, optional privacy protection, EVM (Ethereum Virtual Machine) compatibility, and quantum-resistant architecture. For institutions that already engage in capital allocation, this serves as a new generation of settlement infrastructure and a replacement for ACH, SWIFT, and agency banking systems.

This testnet was launched in October 2025 and has already attracted over 100 institutional participants, including BlackRock, Goldman Sachs, Visa, and State Street, processing 244 million transactions.

However, to be fair, similar institutions have previously joined Tempo and various AI payment and agent protocols we have reported on in the past. This indicates that the industry is diversifying in the process of reconstructing payment tracks.

In contrast, the 3 billion dollars fully diluted valuation (FDV) tied to the presale seems a bit difficult to reconcile. This is because the functionality of the ARC token is still in the exploratory phase. What investors are currently betting on is actually the option value of Circle owning the "stablecoin settlement mother chain" — thus closing the loop on the entire vertical ecosystem and plugging the current leakage of value to third parties. Whether this option is worth 3 billion dollars depends on future transaction volumes. Specifically, it depends on whether Circle can migrate a sufficient share of the current 77 billion dollar supply to Arc, thus generating service fee income sufficient to support that valuation.

At the same time, the regulatory background adds urgency to this situation.

The GENIUS Act, signed and passed in July 2025, explicitly opens the way for banks to issue their own payment stablecoins through subsidiaries and subject to oversight by existing federal regulators. JPMorgan and the Bank of New York have already been running tokenized deposit pilots. Once regulated bank-issued dollar tokens reach scale, market demand for third-party stablecoin issuers like Circle will narrow.

Arc cannot directly solve this problem, but having independent on-chain infrastructure can create network effects and switching costs. This serves as a defensive line against the risk of profits being split or vertically integrated by everyone from Canton to Ripple to JPMorgan's Kinexys.

Circle Agent Stack is an Offensive Battle

Agent Stack is a developer toolkit for building AI agents that can transact using USDC. It consists of a wallet, a marketplace, and a nanopayment layer capable of enabling transfers as low as 0.000001 dollars. The core logic is that as AI agents autonomously take on more operational and financial tasks, the scale and granularity they require for transactions will be unfeasible for existing payment infrastructures (like card networks, ACH, SWIFT, etc.) due to high fixed costs (current networks render splitting small transactions economically unviable). Yet, a USDC-native chain supporting programmable micropayments does not face such a cost floor. For an AI agent that needs to pay based on API call counts, computation seconds, or data queries, there is currently no perfect solution in the market.

Ramp launched Agent Cards in March 2026. In short, it allows businesses to issue virtual cards for their autonomous agents' expenses. Meanwhile, after acquiring Bridge at the end of 2024, Stripe also has its answer: issuing dedicated agent cards through Bridge, providing wallet infrastructure via Privy, and supporting stablecoin payment acceptance across 32 markets.

• Ramp's Agent Cards: Specifically built for enterprise expense control.
• Circle's Agent Stack: Targets USDC native micropayments on the Arc chain.
• Stripe: Positions itself as a full-stack layer (offering fiat, stablecoin, and wallet infrastructure under one API).

Circle vs Stripe

Circle's structural advantage lies in the asset itself.

USDC is the dominant compliant stablecoin and has become a ledger unit for a significant part of on-chain activity. On the other hand, Stripe’s Bridge issues its own stablecoin through "Open Issuance." One of Bridge's flagship issues, USDH, has announced its shutdown this week due to its inability to compete with the 5 billion dollars USDC on Hyperliquid, and Coinbase has consequently intervened to become the official USDC treasury deployer. Building the foundation for agent infrastructure on top of USDC means agents can inherit existing liquidity and network depth from day one. This asset advantage has proven much harder to replicate than it appears.

As mentioned earlier, Stripe has also incubated Tempo — a Layer-1 blockchain specifically tailored for payments. However, Tempo is positioned to support general payment settlement for any stablecoins, while Arc is fully built around USDC. Both companies are betting that the future of payments will clear on a customized dedicated chain rather than on a general chain like Ethereum.

Differences in capital structure are also noteworthy. Circle raised 222 million dollars (3 billion dollars FDV) for Arc via presale. In contrast, Stripe is a privately held, continuously profitable company with its latest valuation at 70 billion dollars — it can fully utilize cash on its balance sheet to fund the expansion of Tempo and Bridge without needing to dilute equity through tokens.

In absorbing and subsidizing the costs of a new chain ecosystem, the ways both companies can deploy their ammunition are fundamentally different.

Ultimately, the capabilities and inclinations of "payment processors (like Stripe)" and "cash-equivalent financial instrument issuers (like Circle)" are starkly different. The former excels in distribution, sitting atop countless merchants and customers within the ecosystem; the latter holds an asset in every exchange and crypto wallet. We believe that blindly pursuing vertical integration and falling into an expensive arms race would be a mistake.

The Arithmetic of the Revenue Ledger

Today's business model for Circle is straightforward: 77 billion dollars of USDC are circulating externally, earning about 4.1% returns on reserve assets, with a significant portion flowing to Coinbase according to distribution agreements. Its total revenue for the year 2025 is projected to be 2.75 billion dollars.

Analysts predict revenues of approximately 3.2 billion dollars in 2026, suggesting a growth of about 15%. In contrast to last year's growth rate of 64%, this figure appears rather mild, reflecting two significant headwinds:

• Declining interest rates compressing yields on reserve assets;
• The GENIUS Act imposing restrictions on how reserve income is shared with distribution partners, subjecting the agreement with Coinbase to regulatory scrutiny.

These new products must be understood in this context. Circle estimates its non-reserve income for 2026 at 150 to 170 million dollars, while higher than the 110 million dollars of 2025, still accounts for less than 6% of total revenue. Transaction fees from Arc, developer income from Agent Stack, and fees from the CPN (Circle Payment Network) are still in very early stages. To achieve a revaluation from "interest proxy tool" to "infrastructure platform," these business lines not only need to grow in absolute terms but also require a substantial increase in revenue share. Currently, Circle's narrative is running faster than its financial numbers.

Stock movements also reflect this tug-of-war. CRCL went public at 31 dollars in 2025, briefly surged to nearly 300 dollars, and then fell back to stabilize around 114 dollars. Following the first-quarter earnings report, JPMorgan raised its price target to 155 dollars, Needham to 150 dollars, while Deutsche Bank set it at 101 dollars. The market consensus expectations hover between 125 and 130 dollars, indicating that the upside potential remains very cautious from current levels.

Bullish and Bearish Views

The bullish logic requires three conditions to be met simultaneously:

• USDC's circulation grows quickly enough to offset the impact of declining reserve yields;
• Arc generates substantial fee income, partially replacing or breaking free from the agreement with Coinbase;
• Agent Stack establishes itself in the foundational architecture field of agent payments before Stripe can overpower it with its size.

If all three points are achieved, Circle will successfully transform into a payment infrastructure company, with its valuation multiples driven by transaction volumes and network effects, rather than being constrained by the Fed's interest rate cycles.

The bearish logic is much simpler:

The speed of declining interest rates outpaces the growth of circulation; the reorganization of the agreement with Coinbase reduces the distribution channels without effectively compensating for transaction volume; Arc fails to migrate a sufficient scale of USDC to its own chain; Stripe or Ramp releases better agent infrastructure at a lower cost, effectively encircling Circle.

These announcements from Circle are undoubtedly correct strategic moves. However, at present, they are still just chips and bets, not yet transformed into real business. Circle is asking investors to pay for the option value of these three simultaneously fulfilled conditions, while its core business model faces tangible structural headwinds. This demand is not unreasonable — just a bit pricey at current valuation levels.