Binance subscribes to approximately 1.237 million shares of Circle, along with a commercial agreement to promote USDC over the next five years.

Written by: ChandlerZ, Foresight News

On September 22, the dollar-pegged stablecoin USDC issuer Circle announced that Binance has invested $100 million into the company, with both parties simultaneously reaching a new five-year commercial agreement to expand the promotion and use of USDC on the Binance platform, focusing on emerging markets.

Circle had previously paid Binance for USDC promotion fees as agreed, and with this subscription of new shares, Binance becomes a shareholder, while Circle will continue to pay Binance monthly incentive fees under the new agreement.

According to documents submitted by Circle to the U.S. Securities and Exchange Commission, the commercial agreement and the share subscription agreement were signed on September 17, with the equity transaction completed shortly thereafter. Binance subscribed to 1,237,011 Class A common shares at $80.84 per share, allowing Circle to receive approximately $100 million in financing. The company added in its announcement on September 22 that the subscription price represents a 5% discount to the market price before the closing.

Binance retains the voting rights for the shares purchased while accepting a transfer restriction of up to two years, which includes limitations on selling, pledging, and transferring economic risks associated with stockholding through derivatives. If Binance terminates the commercial cooperation early under designated circumstances, the share restrictions may also end early; there are exceptions for transfers between related parties.

The five-year commercial agreement replaces two old agreements from November 2024 and August 2025, with both parties having the right to terminate early if certain agreed events occur. Under the new arrangement, the monthly incentive fee that Circle pays to Binance is calculated based on a certain percentage of the USDC amount held through its modular smart contract wallet infrastructure services, with the specific percentage yet to be disclosed. Binance commits to promoting USDC activities on its platform.

Circle's modular wallet service allows developers to selectively use technical components to integrate smart contract wallets into their applications. Users can hold and use USDC through these wallets, and partner platforms can design wallet functionalities tailored to their business. This agreement links the promotional fees to the USDC balance in the related wallets, thus providing Binance with an incentive to encourage users to continue holding USDC.

Circle co-founder and CEO Jeremy Allaire stated in the announcement that both parties aim to expand access to dollars for individuals and businesses in emerging markets, supporting savings and investments through digital asset products. Binance provides existing user and product entry points, while Circle provides USDC and the necessary infrastructure for its holding and use.

Circle previously paid $60.3 million in promotion fees

On December 11, 2024, both parties publicly announced their strategic cooperation during Abu Dhabi Finance Week, with Binance planning to expand the use of USDC in trading, savings, and payment products, adding USDC to the company treasury. Circle is responsible for providing technology, liquidity, and other support.

According to Circle's 2025 annual report, after signing the contract in November 2024, Circle paid Binance a one-time upfront fee of $60.3 million and further pays monthly incentive fees based on the USDC balances on the Binance platform and treasury, with arrangements that include minimum balance requirements.

By August 2025, the collaboration had expanded to modular smart contract wallet services for a duration of four years, implementing a system where incentive fees are based on related USDC balances. Circle's annual report shows that distribution costs associated with Binance increased by $152.1 million in 2025 compared to 2024. This new contract continues the balance-based fee arrangement and resets the collaboration period to five years, with Binance also investing in Circle shares.

Exchanges can provide more reasons for users to hold USDC by adding trading pairs, offering fee discounts, and integrating payment products. For Circle, Binance's ability to incorporate USDC into users' everyday trading and fund management processes reduces the steps users must take to switch platforms or products to use the stablecoin.

Coinbase acquired a stake in Circle back in August 2023, and both parties continue to share USDC reserve income according to the commercial agreement. After this transaction is completed, Binance simultaneously holds the roles of a promotional partner and a shareholder, with USDC balances compliant with the agreement generating incentive fees, while Circle's business performance will affect the value of the shares held by Binance.

Circulation increased by 25%, reserve income only increased by 5%

The USDC issued by Circle is backed by dollar asset reserves, and during the time users hold USDC, interest and dividends are generated from the cash and fund investments in the reserves, which constitute Circle's main source of income. With the reserve yield remaining unchanged, the more USDC in circulation, the more revenue-producing reserve assets there are.

In the second quarter of 2026, Circle's total revenue and reserve income amounted to approximately $701 million, of which reserve income was approximately $668 million, accounting for 95.2%. During the same period, distribution and trading costs were approximately $410 million, making up nearly 60% of the aforementioned total revenue. Distribution fees paid to exchanges and other partners have already become a significant expenditure in this business.

The USDC holding demand brought by Binance has the potential to increase Circle's reserve income while also generating corresponding incentive fees. Ultimately, how much money the company can retain depends on the new reserve income versus the costs incurred to obtain these balances. If the cooperation mainly attracts funds that originally used other stablecoins to switch to USDC, Circle can expand its overall issuance scale; if it only results in the existing USDC moving between different channels, the growth is reflected more in the changes of holding locations and income distribution.

Interest rates will also influence this calculation. In the second quarter, the average circulation of USDC increased by about 25% year-on-year, but the reserve yield declined by 66 basis points, resulting in reserve income increasing by only about 5%. Circle needs more usage scenarios and holding demand to alleviate the pressure on the declining yield of unit reserve assets.

Meanwhile, Binance also benefits from promotional income and equity exposure, as users holding USDC that meets the agreement conditions can generate incentive fees for the platform; Circle's overall business and profitability performance will also affect the value of the shares held by Binance. The equity investment exposes Binance to the operational and stock price risks of the issuing company and strengthens the economic ties of long-term cooperation between both parties.

In addition, both parties are advancing their cooperation on product integration. On September 16, Circle launched the public mainnet of Arc, a public chain designed for financial applications, and Binance announced that it completed the USDC integration on the Arc network and opened for recharge on the same day. The next day, the five-year commercial agreement and the $100 million share subscription were officially signed, with wallet technology, USDC distribution, and equity investment continuing to expand in this round of cooperation.