USDC Soars 72% as Circle Pays $1.4B in Distribution Costs

USDC circulation rose 72% year over year to $75.3 billion in the fourth quarter, Circle reported in its 2025 annual filing. Full-year revenue and reserve income increased 64% to $2.7 billion. Distribution and transaction costs linked to USDC rose to $1.4 billion in 2025 from $924.5 million in 2024, and Circle retained a 39% margin after those costs, the filing shows.

Circle attributes a large share of distribution costs to its partnership with Coinbase. The two companies signed a collaboration agreement in August 2023 with an initial three-year term that runs through August 2026. The contract allows both parties to discuss changes before that date; if no changes are agreed, the agreement will automatically renew for another three years if both sides continue meeting their obligations.

Alternative stablecoin arrangements offer different revenue splits. The Open USD consortium shares reserve earnings with distribution partners after charging a management fee. A decentralized venue, Hyperliquid, applies an AQAv2 framework that routes roughly 90% of cost-adjusted reserve-yield revenue tied to aligned stablecoin supply back to the protocol.

Hyperliquid did not displace USDC’s liquidity on its platform. USDC accounts for about 97% of Hyperliquid’s stablecoin base and roughly $5 billion in circulation there, according to platform estimates. Under Hyperliquid’s framework, a $6.16 billion aligned stablecoin base earning a 3.5% reserve yield would generate about $215.6 million in gross annual reserve income; a 90% allocation to the protocol would equal roughly $194 million.

Circle’s sensitivity analysis in the filing models rate changes while holding circulation and reserve allocation constant. A 100-basis-point rise in yields would increase reserve income by about $756 million and raise distribution and transaction costs by about $369 million, leaving roughly $387 million of incremental income to Circle, or about 51% after costs.

The Office of the Comptroller of the Currency granted final approval for Circle to establish a national trust bank, a regulatory credential noted in the filing. Circle’s report outlines scenarios in which slow adoption of Open USD, a Coinbase agreement renewal on similar terms and limited spread of Hyperliquid-style models would support its current margin. The filing also describes scenarios in which wider adoption of revenue-sharing arrangements by exchanges, wallets and decentralized protocols could reduce Circle’s retained share of reserve income.