How Will Circle's IPO Impact the Stablecoin Market? A Comparison of USDT, USDC, and DAI

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Circle, the issuer of the stablecoin USDC, is accelerating its plans for an Initial Public Offering (IPO). This development is poised to reshape the competitive dynamics of the stablecoin market and influence the broader trajectory of the cryptocurrency industry. Market participants are analyzing this move from various angles, including regulatory implications, ecosystem development, and financial innovation.

This analysis examines Circle's business model, the potential impact of its public listing, and provides a detailed comparison of the three major stablecoins: USDC, USDT, and DAI.

Understanding Circle's Business Model

Circle’s revenue generation primarily revolves around reserve yield earnings, ecosystem partnerships, and enterprise services. For USDC holders, the key benefits are centered on asset security, liquidity, and opportunities for value appreciation.

How Circle Generates Revenue

Reserve Yield Earnings: Circle invests the dollar reserves backing USDC in low-risk assets like short-term U.S. Treasuries and repurchase agreements. The interest earned from these investments constitutes a core profit source. For example, as of early 2025, approximately 58% of USDC reserves were held in U.S. Treasury repo agreements and 42% in direct U.S. Treasury holdings, all managed by BlackRock and subject to daily public audit reports. In 2024, Circle generated $1.7 billion in revenue from these reserve assets, sharing roughly 50% of this income with its partner, Coinbase.

Ecosystem Partnerships: Institutional users pay a fee, typically between 0.1% and 0.5%, when minting (creating) or redeeming USDC through Circle's platform, Circle Mint. Furthermore, USDC operates across 16 blockchains (including Ethereum and Solana). Circle generates revenue from fees on its Cross-Chain Transfer Protocol (CCTP), which facilitated over $200 billion in cross-chain transaction volume in 2024. Circle may also share in transaction fees when USDC is used within lending and liquidity protocols like Compound and Aave.

Enterprise Services: Circle provides USDC-related custody and settlement services to banks and payment companies, exemplified by its collaboration with J.P. Morgan on digital asset infrastructure. It also licenses compliance tools—such as on-chain monitoring and KYC/AML systems—to exchanges and other enterprises for a fee. Following its acquisition of Hashnote in 2025, Circle launched USYC, a tokenized money market fund offering institutions a ~3.8% annual yield, earning management fees in the process. Strategic investments and partnerships, such as with Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, aim to integrate USDC into traditional finance for derivatives trading and clearing, opening new revenue streams.

Benefits for USDC Holders

Security and Compliance

USDC's smart contracts have undergone third-party audits (e.g., by OpenZeppelin) and have no history of major security breaches. Circle is regulated by bodies including the New York Department of Financial Services (NYDFS) and complies with the European Union's Markets in Crypto-Assets (MiCA) framework, ensuring it meets anti-money laundering (AML) and investor protection standards. USDC reserves are held at institutions like Bank of New York Mellon, with portions covered by commercial insurance, providing an additional layer of security.

This commitment to compliance and transparency has made USDC a bridge between traditional finance (TradFi) and crypto. Major asset managers like Goldman Sachs and Fidelity offer USDC custody, attracting institutional investors. Circle collaborates with central banks on projects exploring the use of USDC in CBDC pilots, such as a跨境payment initiative with the Bank of Thailand. USDC is also being used as a pricing unit for security tokens, with ICE planning to use it for bond and derivatives trading to enhance settlement efficiency.

Implications of Circle's Public Listing

Circle's IPO is widely seen as a milestone in the crypto industry's transition from a "niche speculative asset class" to "mainstream financial infrastructure." This shift is driven by several converging factors: increasing regulatory clarity (e.g., U.S. stablecoin legislation, MiCA), technological advancements in cross-chain interoperability and scalability, and deeper integration with traditional financial institutions and DeFi protocols.

While Circle is a bellwether for crypto compliance, its heavy reliance on USDC, potential for sudden regulatory changes, and market volatility pose significant risks. Long-term success could see stablecoins become foundational to the global financial system, allowing Circle to replicate the growth trajectory of a company like Visa. Conversely, stringent regulation or technological hurdles could place downward pressure on its valuation, representing a landscape of strategic opportunity mixed with substantial challenges.

USDC's Market Position and Strategic Focus

Circle's core asset is USDC, which had a circulating supply of ~$60 billion as of March 2025, capturing roughly 35% of the global stablecoin market share, second only to Tether's USDT (~45%). Compared to USDT, USDC's primary advantages are its regulatory compliance and reserve transparency. Its reserves, comprised of ~80% short-term U.S. Treasuries and ~20% cash deposits in globally systemic banks, are audited and disclosed in real-time by third parties. This makes it the preferred choice for traditional institutional investors; companies like Stripe and BlackRock use USDC for跨境payments and asset custody.

Circle has strategically divested non-core assets, such as its exchange and social payment businesses, to focus exclusively on USDC issuance and blockchain infrastructure (e.g., CCTP). While this sharpens its focus, it also creates a singular revenue structure: USDC contributes about 80% of company revenue, with interest income from reserve assets accounting for over 90% of that.

As the second major crypto-native company to go public after Coinbase, Circle's focus on infrastructure—rather than exchange operations—could pave the way for other stablecoin issuers (e.g., Paxos) and DeFi protocol developers (e.g., Aave, Uniswap) to seek public listings, accelerating the industry's shift from "speculation-driven" to "compliance and value-driven."

A Landscape of Opportunity and Challenge

In its IPO filings, Circle explicitly warned that if USDC were classified as a security by the U.S. Securities and Exchange Commission (SEC)—under the Howey Test framework—it could face onerous registration and disclosure obligations, potentially upending its business model.

As a public company, Circle will be subject to stringent SEC disclosure requirements covering reserve composition, smart contract audits, and AML measures. Furthermore, the EU's MiCA regulation mandates that stablecoin issuers hold 30%-60% of their reserves in cash within EU banks, a rule that could reduce Circle's interest income (potentially lowering profitability by ~15%) and increase its reliance on the traditional banking system.

However, Circle remains optimistic about the potential passage of a U.S. Payment Stablecoin Act, believing such legislation would remove barriers for traditional banks and asset managers to enter the crypto space. If enacted, USDC would likely be among the first federally licensed stablecoins, significantly strengthening its market position.

Key Metrics for Investors to Monitor

Post-IPO, the stablecoin market's structure may shift based on regulatory compliance, capital strength, and ecosystem synergy.

Key metrics for the market to watch include: the percentage of reserves held in U.S. Treasuries (should remain >40%); USDC's daily trading volume ranking on DEXs like Uniswap (currently second to USDT); and the results of NYDFS's annual review of Circle (rated "A" in 2024).

Comparing Major Stablecoins: USDC, USDT, and DAI

A stablecoin is a type of cryptocurrency designed to maintain a stable value relative to a specified asset, like the U.S. dollar, through algorithmic mechanisms or collateralization (with fiat assets, cryptocurrencies, etc.). Their primary purpose is to reduce the price volatility inherent in traditional cryptocurrencies like Bitcoin.

For Crypto Businesses: Stablecoins act as a "stable anchor," enabling investors to quickly exchange assets with minimal slippage. They provide a stable unit of account for decentralized lending, derivatives, and other complex financial products (DeFi). During periods of high market volatility, users can convert volatile assets into stablecoins to hedge against price swings, enhancing overall market resilience.

For Traditional Finance: They enable low-cost, instantaneous跨境transfers, challenging traditional bank wire systems. Digital wallets powered by stablecoins can extend financial services to unbanked populations. Their hybrid nature (blending centralized and decentralized elements) pushes regulators to develop robust digital currency frameworks that balance innovation with risk management.

By bridging crypto and traditional finance, stablecoins address crypto's volatility issues while providing a testing ground for the digitization of traditional finance. The following section details the characteristics of USDT and DAI, building on the earlier analysis of USDC.

Tether (USDT)

USDT (Tether) is the oldest and largest stablecoin by market capitalization. Launched in 2014 by Tether Limited, it is pegged 1:1 to the U.S. dollar and is primarily used for cryptocurrency trading settlement and as a store of value.

USDT is issued and redeemed centrally by Tether Ltd. It faced significant scrutiny in its early years over a lack of transparency regarding its reserves. Although Tether claims each USDT is backed by 100% reserves, a 2021 investigation by the New York Attorney General's office revealed its holdings included commercial paper and other non-cash assets, resulting in a settlement and fine. Tether has since worked to improve transparency with regular reserve reports.

Initially issued on the Bitcoin Omni Layer, USDT has expanded to Ethereum, TRON, Solana, and other major chains. Its smart contracts are not mandated to undergo third-party audits, and its technical security relies on Tether's internal risk controls; the asset has historically suffered losses due to private key compromises. USDT operated with minimal regulatory oversight initially but has recently strengthened its compliance efforts, working with bodies like NYDFS. However, it still faces regulatory scrutiny in multiple jurisdictions. Its centralized model creates friction with traditional finance, leading some institutions to limit its use due to compliance concerns.

USDT boasts the highest liquidity of any stablecoin, is supported on over 90% of crypto exchanges, and is deeply embedded in both spot and derivatives trading markets, often acting as a primary fiat on-ramp in emerging markets. While widely used in DeFi, its degree of decentralization is lower than DAI's. Its deep integration with centralized exchanges has made it the de facto "dollar substitute" in crypto.

Dai (DAI)

DAI is an algorithmic, decentralized stablecoin launched in 2017 by MakerDAO, a Decentralized Autonomous Organization (DAO). Pegged 1:1 to the dollar and operating on Ethereum, its core mission is to maintain price stability through fully decentralized mechanisms.

DAI is generated through an over-collateralization process. Users deposit crypto assets like ETH or WBTC (typically at a collateral ratio of ≥150%) to mint DAI. Its stability is maintained algorithmically by adjusting "stability fees" and collateral requirements, with all governance decisions made by the MakerDAO community via smart contract voting, eliminating central control. While DAI has expanded to other chains (e.g., Polygon, Arbitrum), its reliance on volatile crypto collateral and lack of direct fiat backing make integration with traditional financial custody and settlement systems challenging.

DAI runs on Ethereum smart contracts. Its code is open-source and has been audited by firms like OpenZeppelin. However, it has experienced risk events related to flash loan attacks and oracle vulnerabilities. Its fully on-chain nature makes it immune to centralized risks like private key leaks. DAI is deeply integrated into the DeFi ecosystem, supporting lending (Compound, Aave), decentralized trading (Uniswap), and cross-chain bridges (Hop Protocol). It consistently ranks among the top stablecoins by Total Value Locked (TVL) in DeFi protocols. However, its liquidity on centralized exchanges is weaker, with trading volumes significantly lower than USDC and USDT.

As a decentralized asset, DAI operates outside direct oversight from traditional financial regulators but faces potential future compliance risks. Some jurisdictions classify it as a crypto asset subject to AML rules. Its compatibility with the traditional financial system remains limited.

DAI's core advantage is its "trustless" nature, achieving stability through algorithms and community governance, making it fundamental DeFi infrastructure. However, its main challenges include the volatility of its crypto collateral, the sometimes-sluggish efficiency of decentralized governance, and regulatory uncertainty. For traditional institutions, DAI's decentralization may limit its use, but it holds unique value for exploring blockchain-native financial services.

How to Choose a Stablecoin After Circle's IPO

The optimal stablecoin choice depends entirely on the user's specific needs and risk tolerance.

Frequently Asked Questions

What is the main difference between USDC and USDT?
The primary difference lies in transparency and regulatory approach. USDC is known for its high level of reserve transparency and proactive compliance with financial regulations, making it favored by institutions. USDT offers greater liquidity but has faced historical scrutiny over its reserve backing and operates with a different compliance philosophy.

Is DAI a safer stablecoin than USDC or USDT?
"Safety" depends on context. DAI is safer from centralized points of failure (e.g., a single company being shut down) because it is decentralized. However, it carries different risks, primarily smart contract vulnerabilities and the volatility of its crypto collateral. USDC and USDT are considered safer from collateral volatility but carry counterparty and regulatory risk associated with their centralized issuers.

How does Circle make money?
Circle's primary revenue source is the interest earned on the assets (like U.S. Treasuries) that back the USDC in circulation. It also generates income from fees for minting/redeeming USDC, cross-chain transfer services, and providing enterprise-grade blockchain solutions.

Will Circle's IPO affect the price stability of USDC?
No, directly. The IPO is a corporate equity event for Circle, not a direct sale of USDC. The value of USDC is designed to remain pegged to $1 through its reserve backing. However, significant corporate news could indirectly affect market perception and demand for the stablecoin.

What happens if USDC is classified as a security?
If USDC were deemed a security by the SEC, it would subject Circle to extensive registration, reporting, and compliance obligations under U.S. securities laws. This could restrict who can hold and trade USDC, potentially limiting its utility and liquidity, and fundamentally altering its business model.

Can I earn interest on my USDC holdings?
Yes, there are several ways to earn yield on USDC. You can deposit it into savings products on centralized platforms (like Circle Earn), supply it as liquidity to lending protocols or liquidity pools in DeFi, or participate in tokenized money market funds like Circle's USYC (primarily for institutions).