Why Circle's IPO timing is advantageous

Hollie Adams/Bloomberg

With most of the financial world focused on Trump's tariffs, the resulting market churn and a potential recession, it would seem to be a rough time for an initial public offering.

But the outlook at Circle is brighter than it would appear at first glance. The cryptocurrency company plans to list on the New York Stock Exchange under the ticker symbol CRCL, according to Circle's S-1 filing with the Securities and Exchange Commission.

The IPO will likely come later in the spring. Circle is plotting its listing at nearly the same time as Klarna, a Swedish financial institution and buy now/pay later lender. Circle, Klarna and any other company that's going public is doing so in an uncertain time for the financial markets and the broader economy.

Even giving the market storm, Circle can use the IPO to boost its business model in the fast-growing stablecoin market, while pushing potentially favorable regulations.

"Circle's IPO will likely serve as a regulatory forcing function. Once a publicly traded company is issuing digital dollars at scale, U.S. regulators will no longer have the luxury of ambiguity," Thomas Shuster, research director for capital markets, wealth and digital asset strategies at IDC Financial Insights, told American Banker. "Regulators will need to formalize a stablecoin that addresses systemic risk, investor protection and financial stability."

Why now?

From a business perspective, the timing is opportune as Circle is entering a market driven by momentum, with an institutional appetite for tokenized cash and digital infrastructure growing rapidly, Shuster said.

"Its movement towards public listing offers other crypto-native firms a template for entry into a fragmented regulatory environment," Shuster said. "The anticipated implications for capital movement, liquidity, and yield access are significant and will put traditional financial [providers] on notice, given the popularity of USDC."

Circle is best known as the issuer of the USDC stablecoin, which has grown substantially in the past year, reaching a market capitalization of $60 billion, up from $30 billion in March 2024. USDC is the second-largest stablecoin, trailing Tether, which has a market capitalization of $144 billion, or 63% of the market. USDC's stablecoin market share has increased to more than 25% from 21% in March 2023.

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In its S1, Circle reported $1.68 billion in revenue in 2024, up from $1.43 billion in 2023 and $785 million in 2022. It also reported a more inconsistent view of net income, reporting $221 million in 2024, down from $318 million in 2023 and much better than a loss of $758 million in 2022.

USDC has rebounded from a slump in 2022, when Circle pulled an earlier attempt to go public through a special purpose acquisition corporation, or SPAC. USDC in 2023 briefly lost its 1:1 peg between the stablecoin and its backing assets following the collapse of Silicon Valley Bank; some of the assets backing USDC were held at the failed SVB.

Circle relies on the interest from its backing assets, or reserves, to make money, which could pose a challenge for it in the future. The company got more than 99% of its $1.68 billion in revenue in 2024 from reserve income, with $15 million coming from other revenue streams.

An interest rate cut of 1%, for example, would shave $440 million from Circle's stablecoin reserve revenue in a single year, according to Circle's S-1. But the company also says lower interest rates would increase the amount of USDC in circulation. Circle did not return a request for comment.

"There's a question of 'will interest rates hold?'" Robert Le, a crypto analyst for PitchBook, told American Banker. "If rates drop, that would materially impact Circle's revenue. And if something were to happen in the broader cryptocurrency market and a lot of USDC gets redeemed, that could be a problem." 

Better rules

SVB's collapse drew attention to the risks of stablecoin reserves, and if the stablecoin could be redeemed in the event of the failure of the stablecoin issuer or one of the issuer's partners.

In the wake of the SVB failure, the collapse of cryptocurrency exchange FTX and steep losses at other cryptocurrency companies during the so-called "crypto winter," the U.S. has moved to regulate stalecoins and other cryptocurrencies.

Circle is hoping for a favorable regulatory environment as it prepares to go public. The Guiding and Establishing a National Innovation for U.S. Stablecoins, or GENIUS, Act, a bipartisan bill that would create a regulatory framework for payment stablecoins, is pending in Congress. The GENIUS Act is part of a broader legislative effort to forge a U.S. legal framework for stablecoins, following a similar trend toward regulatory support in the European Union. 

The bill, combined with the Trump administration's support for the broader cryptocurrency industry, has created a bullish outlook for cryptocurrency. Circle has pushed for cryptocurrency regulation in the U.S., with Gordon Liao, chief economist and head of research for Circle, saying there would be "no shortage of opportunities" if the GENIUS Act is passed, at American Banker's recent Payments Forum conference.

Stablecoins, which are intended to be backed by traditional currency such as U.S. dollars as a hedge against volatility, are considered the most likely form of cryptocurrency to execute retail payments. Stablecoins have drawn attention from the card networks as a payment option, and PayPal has issued its own stablecoin.

Circle's IPO, which is expected to value the company at about $5 billion, is coming as banks get more active in stablecoins.

The timing of Circle's IPO represents confidence that the regulatory environment for stablecoins is improving, and that there will be a lot of investor interest in the stablecoin issuer, Aaron McPherson, a principal at AFM Consulting told American Banker.

"The economics of stablecoins are attractive, because you get interest from the treasuries and money market funds that back the stablecoin, and don't have to pay any of that out to holders. So I think they will do well," McPherson said, though he added there are risks to the $5 billion valuation. "There is about to be a lot more competition, as banks look to launch their own stablecoins, joining existing stablecoins like PYUSD and Ripple."