Unchained
USDC's Circle Just Filed to IPO. Would It Make a Good Investment? - Ep. 812
Apr 4, 2025
Omar Kanji, a Partner at Dragonfly, delves into Circle's recent IPO filing for USDC and what it means for the stablecoin landscape. He discusses the staggering regulatory compliance costs Circle faces, contrasting it with Tether's strategy. The valuation of Circle at $5 billion raises eyebrows, and Kanji explores how forthcoming regulations could reshape competition. Moreover, he highlights the potential challenges posed by Trump's tariffs on Circle's growth, providing a nuanced look at the evolving crypto landscape.
43:06
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Quick takeaways
- Circle's heavy reliance on distribution agreements and high operational costs poses significant sustainability challenges for its revenue model.
- Anticipated regulatory clarity in the crypto space could lead to increased competition, complicating Circle's long-term growth potential as an investment.
Deep dives
Distribution Costs Impacting Circle's Profitability
Circle is facing significant distribution costs that heavily impact its revenue model. For example, in 2024, Coinbase received over half of Circle's revenue, at approximately $900 million, which raises concerns about sustainability if these costs are too high. Circle also struck a deal with Binance requiring a substantial one-time payment and a recurring percentage-based fee for maintaining USDC in its treasury. The reliance on such distribution agreements is seen as necessary for acquiring market share but poses questions about how much profit Circle can retain amidst fierce competition among stablecoin issuers.
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