Who Earns the Interest on Your USDC?
Circle booked $701.3 million in second-quarter revenue and reserve income, but most of it went to partners and costs, and USDC’s terms give holders no claim on the reserve interest.
Key Takeaways
- Coinbase-linked costs absorbed $324.6M of $701.3M.
- Circle kept $48.2M after costs and tax.
- Average USDC rose 25%; reserve income only 5%.
- Holder rewards come from platforms, not reserves.
Where every $100 went
Split into shares of $100, Circle’s quarter looks like this, based on its second-quarter results filed with the SEC on August 5:
$46.30 Coinbase-linked distribution costs
$12.50 other distribution, transaction and related costs
$36.30 operating expenses: staff, technology, administration
$4.90 operating income, rising to about $6.90 of net income after other income and tax
In dollars, the quarter ran as follows:
Rounded; steps may not sum exactly.
The $412.5 million line is the one that answers the headline. Most of it, $324.6 million, is tied to Circle’s agreements with Coinbase. The rest covers other partners, transaction costs and related items.
Why the reserve money isn’t Circle’s to spend
The dollars behind USDC sit in reserves kept apart from Circle’s operating funds. According to Circle’s transparency page, they are held as cash and in the Circle Reserve Fund, which can own short-dated US Treasuries and overnight Treasury repurchase agreements. Those assets earn interest while staying ready to meet redemptions, and that interest is where most of Circle’s revenue comes from.
Holders have no claim on it. Circle’s USDC terms for users outside the European Economic Area state that holders are not entitled to interest or other returns earned on the reserves; EEA holders are covered by separate documentation.
Your dollar becomes USDC
↓
Reserves buy Treasuries and repo
↓
Interest goes to Circle
↓
Circle pays Coinbase and other partners
↓
A platform may choose to pay you a reward
More USDC, thinner returns
Circle’s earnings release shows average USDC in circulation up about 25% from a year earlier, while reserve income grew only about 5%. The return on reserves fell by 0.66 percentage points as interest rates came down.
The quarterly filing puts numbers on the tug of war: roughly $147.4 million of extra reserve income came from having more USDC outstanding, and roughly $113.9 million was lost to lower yields. Circle still improved where it counts for its own margins. Revenue left after distribution, transaction and other costs rose about 15%.
How Coinbase’s share is worked out
Coinbase’s cut comes in two parts. It receives income tied to the USDC held on its own platform, after an amount Circle keeps as issuer. It also takes half of what remains from USDC held elsewhere, once other partners’ allocations are paid.
That is why an exchange values USDC balances even when customers are not trading them: the balances earn the exchange money. Competing stablecoins use similar partner economics to win distribution, as Coindoo explained in its look at Open USD’s partner incentives.
When reading these numbers, keep the companies separate. Coinbase’s USDC income and Circle’s reserve income describe the same money from two sets of books, so adding them together counts it twice.
What you actually earn
Any reward a holder receives comes from the platform, on the platform’s terms. Coinbase describes its USDC rewards as a loyalty programme it funds itself, with rates that vary by region and account type, eligibility rules, and the right to change or end it. Moving USDC to another wallet leaves the programme behind.
Membership fees can change the maths. Using hypothetical figures:
+$40
a year from $1,000 at 4%
−$120
a year for a $10 monthly membership
A holder paying for a membership only to unlock the reward would be $80 a year behind on those numbers, before tax. Real rates, balances and other membership benefits would change the result.
Spending USDC carries its own fees
Paying with USDC adds a separate set of costs that never touch Circle’s accounts. Payment providers charge businesses for processing, screening, conversion and payouts. Stripe’s documentation, for example, describes customers paying in supported stablecoins while merchants are settled in local currency in their Stripe balance. As Coindoo noted in its piece on stablecoin conversion costs, what matters to the recipient is the amount they can actually spend, the total fees and how long the money takes to arrive.
Circle publishes its third-quarter results on November 4, with updated figures for circulation, reserve yields and partner payments.
This article is provided for informational purposes only and does not constitute financial or investment advice.
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 5,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
