Original title: Coinbase Will Have to Acquire Circle – The Only Question Is Price
Original author: @yiryan, vectordao member
Original translation: zhouzhou, BlockBeats
Editors note: USDC is Coinbases second largest source of revenue, but due to its cooperation with Circle, the revenue attribution is limited. Circle controls the protocol layer and focuses on expanding the overall market value, while Coinbase wants to take USDC completely into its pocket to achieve revenue unification and protocol control. If Coinbase acquires Circle, it can obtain full revenue, product synergy and regulatory advantages. In the long run, the acquisition is a reasonable and necessary strategic choice, and the key is only the price.
The following is the original content (for easier reading and understanding, the original content has been reorganized):
background
I’ve been working in the crypto industry for many years — first at CoinFund (an early-stage fund) and later at Coinbase to help expand its venture capital strategy.
Everything in this article is based on public data: Circle’s S-1 prospectus (April 2025) and Coinbase’s public financial reports. No insider information - just analysis that anyone can reproduce, but most people won’t.
USDC Supply Structure Breakdown
Total USDC = USDC held by Coinbase + USDC held by Circle + All other parts
According to the definition in the S-1, platform USDC refers to the proportion of stablecoins held by a party in a custody product or wallet management service. This means:
Coinbase = Coinbase Prime / Exchange
Circle = Circle Mint
Other = USDC stored on Uniswap, Morpho, Phantom, etc.
Coinbase’s share of the total USDC supply is growing rapidly — reaching about 23% in the first quarter of 2025. Circle’s share, on the other hand, remains stable.
This makes sense — as Coinbase has greater influence in the consumer, developer, and institutional markets.
USDC Profit Allocation
Both Circle and Coinbase can obtain 100% of the USDC reserve income on their platforms. For USDC outside the platform (that is, other parts), both parties will share 50%.
But here’s the key point: Circle gets a disproportionate share of the revenue from USDC outside of its platform. Even though Coinbase has 4x the amount of USDC on its platform as Circle, its advantage in revenue is only about 1.3x.
Based on a rough calculation of a 50/50 split of the “other” revenue, the following revenue share is obtained:
Circle: Betting on market size, not control
Circle’s motivation is clear: to expand the overall circulation of USDC, even if these USDC are not stored on its own platform. Circle’s ideal world is that USDC becomes the first stablecoin of the US dollar - which in itself can bring it a solid market position. It benefits from being a protocol layer, such as:
Issue and maintain USDC smart contracts across more than 19 chains;
Control CCTP for native cross-chain and minting/destruction flows.
Although USDC on the platform is more profitable, its growth is not obvious. In terms of large customer development, Circle is likely to lose to Coinbases size. But as long as USDC becomes the largest dollar stablecoin, Circle will still be the winner - this is a market size game, not a profit margin game.
The total market for USDC in the future may be surprisingly large, so even if it cannot take all the profits, it is not a bad outcome - most of the revenue growth will come from the off-platform part. This motivation is consistent with Circles capabilities: it controls the governance, infrastructure, and technical roadmap of USDC.
Coinbase: USDC must be under full control
Macro level
USDC is Coinbases second-largest revenue source, accounting for about 15% of total revenue in Q1 2025, exceeding the staking business. More importantly, it is Coinbases most stable and scalable source of infrastructure revenue. As USDC expands globally, its potential will grow exponentially.
USDC will become a key moat for Coinbase. Although the income from centralized exchanges (CEX) is still the main force, in comparison, USDC income is more stable and will grow in sync with the overall crypto economy.
USDC is likely to become one of the top three stablecoins, and thus become the main channel for exporting USD technology to the world. Fintech and traditional financial giants have long been aware of this and have entered the market. However, USDC has the first-mover advantage and the support of the native crypto ecosystem, and is expected to survive and continue to grow. From the perspective of infrastructure and regulation, owning it completely is a very valuable story.
Micro level: Coinbase’s monetization paradox
Coinbase is the main force driving USDCs growth, but it is structurally constrained. Now, USDC is Coinbases second largest source of revenue (after trading). Therefore, every product decision must consider revenue and profit margins. But the problem is: while Coinbase is expanding the market, it cannot fully control profits because off-platform revenue can only be divided in half.
The irony is that Coinbase was capped on revenue due to architectural issues while attracting users, building infrastructure, and increasing transaction frequency. Its consumer and developer products were “weakened” from the start.
Coinbase’s natural response is to convert the “potential market” into “Coinbase USDC” — that is, the part within the platform that can be fully cashed (balances in custody products can obtain 100% reserve income). This strategy has indeed worked: the proportion of USDC within the Coinbase platform has quadrupled in two years. But this only applies to custody USDC, that is, Exchange + Prime.
The problem lies in the “hosting gray area” - user growth occurs here, but the attribution of revenue becomes unclear.
Coinbase Wallet is non-custodial, and although Smart Wallet improves the experience and may have added a shared key mechanism, it still does not meet the definition of Platform USDC in S-1.
If most users use on-chain products through such wallets in the future, the ownership of this part of USDC will be in a gray area between Circle and Coinbase.
Base (Coinbase’s L2) is also a non-custodial architecture, where users can exit to Ethereum L1 on their own, and Coinbase does not hold the key. Therefore, even if Coinbase is the entry point, USDC on Base is likely not to be classified as “Coinbase USDC”.
Conclusion: Coinbase has driven the growth of USDC, but has built in a weakening system. As long as it does not control the entire protocol, it will always face uncertainty about the ownership of revenue. The only complete solution is to acquire Circle and rewrite the rules.
What Coinbase will gain from acquiring Circle
100% profit attribution: No more worrying about “custodial vs. non-custodial”, Coinbase can directly claim all $60 billion USDC interest income, no matter where these USDC are placed.
Protocol control: USDC’s smart contracts, multi-chain integration, and CCTP all become internal assets.
Strategic product synergy: Wallet, Base, and future on-chain experience products can all be converted into USDC natively without coordination.
Regulatory integration: Coinbase is already a leader in policy making, and with control of USDC, it can lead the direction of stablecoin regulations.
Uncertainties/Points to be explored
Growth potential: USDC’s current market value is approximately $60 billion, and it can theoretically grow to $500 billion, corresponding to an annual reserve income of $20 billion, which is expected to push Coinbase to the level of profitability of the “Mag 7”.
Regulatory policy: The United States is pushing for stablecoin legislation, which is good for market growth. Stablecoins will become a new carrier for the globalization of the US dollar, but they may also limit the way platforms promote income or savings products. If Coinbase owns the entire stack, it can flexibly adjust its strategy to respond to policy changes.
Operational complexity: USDC was originally operated by a consortium, and the structure may have been based on legal/regulatory considerations at the time. Although these obstacles seem manageable under a unified architecture, the legal structure may contain unknown risks. But at present, there are no insurmountable problems.
Purchase price
No one can accurately predict market valuations, but we can use the following data as a guide:
Circle plans IPO with $5 billion valuation;
Ripple has proposed a $10 billion valuation;
Coinbase’s current market capitalization is approximately $70 billion;
USDC currently accounts for 15% of Coinbases revenue. If integrated after the acquisition, there is a clear path to increase this proportion to more than 30%.
My judgment is:
Circle is a natural acquisition candidate for Coinbase, and Coinbase is well aware of this;
Circle wants the public markets to price it ($5 billion is its goal);
Coinbase wants to see what valuation the market gives Circle;
Coinbase knows this:
1. It must have a full stack of USDC;
2. After the integration, USDC can account for 15% to 30% of its revenue;
3. Based on revenue value, USDC’s “reasonable valuation” should be between $10 billion and $20 billion.
Circle knows this, too — and realizes that, as long as USDC continues to grow, Coinbase will eventually choose to acquire it outright in order to resolve the business, product, and governance frictions that arise in the partnership.
Final Thoughts
Coinbase should acquire Circle, and likely will.
The cooperation between the two parties can continue at present, but in the long run, the conflicts in the platform, product and governance levels are too great to be ignored. The market will give a price, but both parties have long been clear about the value of each other.
