Circle IPO Analysis: 98% of Revenue Dependent on Reserve Asset Investment Facing Sovereign Stablecoin Competition Risks

Stablecoin issuer Circle’s profit model was disclosed after its U.S. listing, showing that 98% of the company’s revenue last year came from investment income on reserve assets. Reserves usually need to be high-quality, short-term and highly liquid assets, but the data provided by Circle shows that the yield on its reserve assets in the past three years has ranged from 0.14% to 5.17%, indicating that its income momentum at this stage is quite focused on the interest rate trend of assets such as short-term bonds. In addition, Circle also faces a potential market competition risk, that is, once sovereign-level institutions participate in the issuance of stablecoins in the future, it may quickly gain a certain market share with the advantage of “zero counterparty risk”, and the analysis believes that it is necessary for Circle to expand its crypto ecosystem.