Original Source: Fintech Blueprint
Compiled and Arranged by: BitpushNews
Yesterday, the U.S. SEC disclosed the latest quarterly 13F holdings report. Duan Yongping, known as the "Chinese Warren Buffett," made a significant portfolio adjustment for the account H&H International Investment LLC, which discreetly manages his family wealth and charitable funds exceeding $20 billion. For the first time ever, he opened a position in the compliant stablecoin giant Circle (stock code: CRCL), with a holding value of $19.08 million.
As a steadfast value investor, Duan Yongping gained fame for heavily investing in Apple and Kweichow Moutai. His investment philosophy has always adhered to "don't invest in what you don't understand." This move to open a position in Circle not only signifies the formal acceptance of compliant Web3 assets by traditional, established capital. This article will deeply analyze Circle's Q1 performance and latest product layout, examining whether this stablecoin giant can complete a business model pivot from "interest-driven" to "infrastructure" through the reconstruction of its underlying architecture.
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Circle has had a busy week.
Alongside the release of its 2026 Q1 results—total revenue and reserve interest income approaching $700 million (up 20% year-over-year), USDC circulation reaching $77 billion, and on-chain transaction volume hitting $21.5 trillion—the company also announced two major product updates and completed a $222 million token presale.
Changing the "Interest Rate Coupon" Label
For a long time, Circle has been labeled as an "interest rate proxy tool": in 2024, 99% of its revenue came from interest earned on USDC reserve assets.
This makes the business extremely sensitive to interest rate cycles and leaves equity investors with little basis for valuation beyond spread income and USDC issuance growth. Arc (its Layer-1 blockchain), Circle Agent Stack (its agent technology stack), and the Payments Network are precisely Circle's concentrated efforts to change this status quo—aiming to diversify revenue and re-rate the stock's valuation logic from a "yield multiple" to an "infrastructure multiple."
Perhaps most unusual is this: Circle, as a publicly listed company with a traditional equity structure, actually raised $222 million through a token presale for its new Layer-1 blockchain focused on stablecoins, achieving a $3 billion fully diluted valuation (FDV).
In finance, some tools go onto the regular Cap Table, while others are tokens for specific protocols. Notably, Coinbase's Ethereum L2 network Base has still not issued a token. A publicly listed company worth tens of billions of dollars being able to complete such a token financing means token assets have officially landed on Wall Street.
This funding round was led by Andreessen Horowitz (a16z), which committed $75 million, with BlackRock and Apollo also participating. The presale includes multi-year lock-ups; investors also have repayment rights if key milestones for the Arc network are not met.
Circle holds 25% of the initial token supply of 10 billion, 60% is allocated to network participants, and 15% is reserved as a long-term treasury. The Arc mainnet is expected to launch in the summer of 2026, and as of early May, its testnet had processed 244 million transactions.
Currently, the utility of the ARC token is still being explored. This means you can still raise over $200 million today even without well-designed tokenomics. Moreover, if we look closely, you actually don't need $200 million to build a Layer-1 blockchain either.
Alongside launching Arc, Circle also announced the Circle Agent Stack—a toolkit for developers to build "AI Agents that transact using USDC," which includes a wallet, a marketplace, and a nanopayments layer capable of supporting transfers as low as $0.000001.
With this, the company joins Stripe, Coinbase, Visa, Mastercard, Shopify, Fiserv, and Brex in the race to "bank the bots."
Arc is a Defensive Battle
Today, USDC runs on dozens of public blockchains and wallets like Ethereum and Solana. Circle can earn interest income from all those reserve assets. The question is, how much of that income can it actually keep in its own pocket.
According to the "Cooperation Agreement" signed with Coinbase in 2023 (this agreement was signed when the Centre consortium dissolved, at which time Coinbase, as Circle's largest distribution channel, had significant negotiating leverage), the distribution of reserve interest income is divided into three steps:
- Circle first extracts a small issuer fee at the very top.
- Subsequently, each party earns reserve interest income proportional to the amount of USDC held in their respective custody products.
- As for all remaining profit—Coinbase directly takes 50%.
The result is that Coinbase can skim a portion of the reserve interest income even from USDC that has no custody relationship with it whatsoever.
In 2024, out of Circle's total revenue of $1.68 billion, a staggering $908 million was handed over to Coinbase. The agreement automatically renews every three years, and Circle has no unilateral right to exit. Therefore, Arc is, to some extent, an effort by Circle to build an underlying infrastructure that it fully controls and directly earns fees from.
To reiterate: Coinbase has a 50% "shearing right" on almost all of Circle's income, and Circle has no way out except to find a clever "backdoor."
The customer acquisition logic for Arc is straightforward: a Layer-1 blockchain built natively for stablecoin finance. It uses USDC as the Gas token, features sub-second transaction finality, optional privacy, EVM compatibility, and a quantum-resistant architecture. For institutions whose very business is moving money, this is next-generation settlement infrastructure and a replacement for ACH, SWIFT, and correspondent banking systems.
The testnet launched in October 2025 and has already attracted over 100 institutional participants, including BlackRock, Goldman Sachs, Visa, and State Street, processing 244 million transactions.
To be fair, similar institutions have also joined Tempo and various other AI payment and agent protocols we've covered in the past. This shows the industry is diversifying in its reconstruction of payment rails.
In contrast, the $3 billion FDV attached to the presale is somewhat harder to justify. Because the ARC token's functionality is still being explored. What investors are currently betting on is the option value of Circle owning the "mother chain for stablecoin settlement"—thereby closing the loop on the entire vertical ecosystem and plugging the current leak of value to third parties. Whether this option is worth $3 billion depends on future transaction volume. Specifically, it depends on whether Circle can migrate enough of its current $77 billion circulation to Arc to generate service fee revenues that support that valuation.
Meanwhile, the regulatory backdrop adds urgency.
The GENIUS Act, signed into law in July 2025, explicitly paved the way for banks to issue their own payment stablecoins through subsidiaries, overseen by their existing federal regulators. JPMorgan and Bank of New York are already running tokenized deposit pilots. Once regulated bank-issued dollar tokens reach scale, the market's need for third-party stablecoin issuers like Circle narrows.
Arc doesn't directly solve this, but owning its own on-chain infrastructure can create network effects and switching costs. It's a defensive line to hedge against the risk of everyone from Canton to Ripple to JPMorgan's Kinexys carving up profits or vertically integrating.
Circle Agent Stack is an Offensive Battle
The Agent Stack is a developer toolkit for building AI agents that can transact using USDC. It consists of a wallet, a marketplace, and a nanopayments layer capable of transfers as low as $0.000001. The core logic is this: as AI agents autonomously take on more operational and financial tasks, the transaction scale and granularity they require will be something existing payment rails (like card networks, ACH, SWIFT) cannot support due to high fixed costs (which make fraction-of-a-cent transactions economically unviable). A USDC-native chain supporting programmable micropayments has no such cost floor. For an AI agent that needs to pay per API call, per compute-second, or per data query, there is no perfect solution on the market today.
Ramp launched Agent Cards in March 2026. In short, it allows businesses to issue virtual cards for the expenses of autonomous agents. Stripe, after acquiring Bridge in late 2024, has its own answer too: issuing agent-specific cards via Bridge, providing wallet infrastructure via Privy, and supporting stablecoin payment acceptance in 32 markets.
- Ramp's Agent Cards: Built for corporate expense control.
- Circle's Agent Stack: For USDC-native micropayments on the Arc chain.
- Stripe: Positions itself as a full-stack layer (offering fiat, stablecoins, and wallet infrastructure under one API).
Circle vs. Stripe
Where Circle holds a structural advantage is in the asset itself.
USDC is the dominant compliant stablecoin and has become the unit of account for a large portion of on-chain activity. Bridge, under Stripe, issues its own stablecoins via "Open Issuance." USDH, one of Bridge's flagship issuances, announced its shutdown this week as it couldn't compete with the $5 billion USDC on Hyperliquid, with Coinbase stepping in as the official USDC treasury deployer. Building agent infrastructure on top of USDC means agents inherit existing liquidity and network depth from day one. This asset advantage has proven far harder to replicate than it might seem.
As mentioned, Stripe also incubated Tempo—a Layer-1 blockchain tailored specifically for payments. However, Tempo is positioned as a universal payment settlement layer for any stablecoin, whereas Arc is built entirely around USDC. Both companies are betting: the future of payments will settle on custom, dedicated chains, not on general-purpose chains like Ethereum.
Differences in capital structure are also noteworthy. Circle raised $222 million ($3 billion FDV) for Arc via a presale. Stripe, on the other hand, is privately held, consistently profitable, and valued at $70 billion in its latest round—it can fully fund the expansion of Tempo and Bridge using cash on its own balance sheet, without needing to dilute equity via tokens.
There is a fundamental difference in the ammunition available to each company when it comes to absorbing and subsidizing the costs of a new chain's ecosystem.
Ultimately, the capabilities and inclinations of a "payment processor (like Stripe)" and an "issuer of cash-equivalent financial instruments (like Circle)" are fundamentally different. The former excels at distribution, with countless merchants and customers in its ecosystem; the latter holds a piece of the asset in every exchange and crypto wallet. We believe blindly pursuing vertical integration and engaging in expensive arms races would be a mistake.
The Arithmetic of the Revenue Ledger
Circle's business model today is simple: $77 billion of USDC in circulation, earning roughly 4.1% on reserve assets, a significant portion of which flows to Coinbase under the distribution agreement. Its full-year 2025 revenue was $2.75 billion.
Analysts project approximately $3.2 billion in revenue for 2026, implying about 15% growth. Compared to last year's 64% growth rate, this number appears quite modest, reflecting two realistic headwinds:
- Declining interest rates compressing reserve asset yields;
- The GENIUS Act imposing restrictions on how reserve income is shared with distribution partners, putting the Coinbase agreement under regulatory scrutiny.
The new products must be understood in this context. Circle estimates non-reserve revenue for 2026 at $150-$170 million, up from $110 million in 2025, but still less than 6% of total revenue. Arc transaction fees, Agent Stack developer revenue, and CPN (Circle Payments Network) fees are all in their very early stages. To achieve a valuation re-rating from "interest rate proxy" to "infrastructure platform," these business lines not only need to grow in absolute terms but must also show a material increase in revenue share. From the current trajectory, Circle's story is running ahead of its financial figures.
The stock movement also reflects this tug-of-war. CRCL IPO'd in June 2025 at $31, briefly surged to nearly $300, then retraced and stabilized around $114. Following the Q1 earnings report, JPMorgan raised its price target to $155, Needham to $150, while Deutsche Bank gave a target of $101. Market consensus expectations hover around $125-$130, implying very cautious upside from current levels.
Bull and Bear Cases
The bull case requires three conditions to materialize simultaneously:
- USDC circulation grows fast enough to offset the impact of declining reserve yields;
- Arc generates substantial fee revenue and partially replaces or frees Circle from the Coinbase agreement;
- Agent Stack establishes a foundational position in agent payments before Stripe leverages its scale to dominate.
If all three are achieved, Circle will successfully transition into a payment infrastructure company, its valuation multiple driven by transaction volume and network effects, not shackled to the Fed's interest rate cycle.
The bear case is much simpler:
Interest rates fall faster than circulation grows; the Coinbase agreement is restructured in a way that reduces distribution channels without adequately replacing transaction volume; Arc fails to migrate enough USDC onto its own chain; Stripe or Ramp launches better agent infrastructure at lower cost, encircling Circle.
These announcements by Circle are undoubtedly the right strategic moves. But for now, they are just chips and bets, not yet transformed into real businesses. Circle is asking investors to pay for the option value of these three conditions materializing simultaneously, while its core business model faces tangible structural headwinds. This ask is not unreasonable—it just seems a bit expensive at current valuation levels.
