According to a Bloomberg report, Circle, a prominent player in the stablecoin market, strategically leverages its substantial cash reserves of over $1 billion to weather fresh competition from non-crypto giants like PayPal.
The company’s market share of the second-largest stablecoin, USD Coin (USDC), has been declining, mainly due to factors such as Binance’s decision to reduce its usage of USDC.
However, per the report, Circle remains optimistic about the future of stablecoins and aims to stem the decline while exploring new revenue streams and global expansion.
Circle Relies On $1 Billion Cash Cushion
The circulation of Circle’s USDC has witnessed a significant drop from $45 billion to approximately $26 billion this year, while Tether, the leading stablecoin, has experienced growth during the same period.
Circle attributes part of this decline to Binance’s reduced utilization of USDC to promote its native token. Increasing competition from non-crypto companies like PayPal further intensifies the challenges for Circle.
The company’s over $1 billion cash cushion provides a significant hedge against market headwinds. The company generates revenue primarily from interest income on assets backing the USDC, including dollar deposits and short-term Treasuries.
According to Bloomberg, Circle’s strong financial performance is “evident,” with revenues exceeding $779 million in the year’s first half.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $219 million in the same period, exceeding the 2022 full-year figure of $150 million.
Circle’s CEO Remains Bullish On Stablecoins
While acknowledging the impact of “tail-risk events” on USDC adoption, Circle’s CEO, Jeremy Allaire, remains optimistic about stablecoins’ mainstream potential. Allaire believes that increasing competition, such as PayPal’s recent entry into the market, will drive more financial services and internet payment firms to embrace stablecoins.
Circle is actively pursuing partnerships to promote the broader adoption of USDC and plans to enhance transparency by regularly sharing financial reports. Moreover, the company has engaged Deloitte as its auditor.
Allaire anticipates that stablecoin issuers will face greater scrutiny and regulatory standards in the coming years. With regulators tightening control over stablecoins globally, he predicts that entities unable to meet these…
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