Circle, the company behind the $60 billion $USDC stablecoin, has filed a preliminary prospectus for its upcoming IPO.

The filing reveals impressive 2024 revenue of nearly $1.7 billion but a relatively modest operating income of $167 million.

As Circle (NYSE:NYSE:CRW) prepares for its IPO, a closer look at the company's 2024 financials reveals a unique set of priorities. Having previously announced a revenue total of nearly $1.7 billion and operating income of $167 million, the company's new filing provides further insights.

With reported spending of over $1 billion, largely on distribution and largely driven by its arrangement with Coinbase (NASDAQ:COIN) (formerly holding a 50% stake in USDC), Circle's spending is far from minimal. However, a major factor impacting profits is the costly deal with Coinbase, which also saw the exchange's stake in USDC grow from 5% in 2022 to 20% in 2024.

This drove up Circle's distribution costs. Though newer stablecoins like Global Dollar and M are distributing revenue to partners, Circle's hands are tied by the Coinbase deal for the initial six-year term.

The filing also highlights the company's new partnership with Binance, announced in late 2024. As reported by BitKE, this partnership saw a significant upfront cost with a $74.1 million increase in "other distribution incentive costs" attributed in part to the new arrangement with Binance to make USDC more extensively available across their full suite of products and services.

Despite competition heating up, USDC remains the top regulated stablecoin, presenting ample avenues for growth.

Unpacking The Coinbase Link

While the prospectus doesn't fully divulge every detail, it does share key aspects of the Coinbase deal, though deciphering it requires effort. Circle paid $209.9 million in stock – about 8.4 million shares – to acquire Coinbase's stake in Centre. The subsequent revenue-sharing agreement is multifaceted.

Circle takes a small initial cut to cover crucial operating costs. Afterward, revenues are split based on the $USDC held in custodial wallets by each company. Beyond that, Coinbase receives 50% of revenues from $USDC held in third-party wallets.

This drove up Circle's distribution costs. Though newer stablecoins like Global Dollar and M are distributing revenue to partners, Circle's hands are tied by the Coinbase deal for the initial six-year term. The filing also highlights the company's new partnership with Binance, announced in late 2024.

As reported by BitKE, this partnership saw a significant upfront cost with a $74.1 million increase in "other distribution incentive costs" attributed in part to the new arrangement with Binance to make USDC more extensively available across their full suite of products and services.

Despite competition heating up, USDC remains the top regulated stablecoin, presenting ample avenues for growth.

Unpacking The Coinbase Link

While the prospectus doesn't fully divulge every detail, it does share key aspects of the Coinbase deal, though deciphering it requires effort. Circle paid $209.9 million in stock – about 8.4 million shares – to acquire Coinbase's stake in Centre. The subsequent revenue-sharing agreement is multifaceted.

Circle takes a small initial cut to cover crucial operating costs. Afterward, revenues are split based on the $USDC held in custodial wallets by each company. Beyond that, Coinbase receives 50% of revenues from $USDC held in third-party wallets.

This drove up Circle's distribution costs. Though newer stablecoins like Global Dollar and M are distributing revenue to partners, Circle's hands are tied by the Coinbase deal for the initial six-year term. The filing also highlights the company's new partnership with Binance, announced in late 2024.

As reported by BitKE, this partnership saw a significant upfront cost with a $74.1 million increase in "other distribution incentive costs" attributed in part to the new arrangement with Binance to make USDC more extensively available across their full suite of products and services.

Despite competition heating up, USDC remains the top regulated stablecoin, presenting ample avenues for growth.

Now, examining the figures closely:

Coinbase's share of USDC grew from 5% in 2022 to 20% in 2024, a factor that may continue to inflate Circle's distribution costs.

Earlier reports indicated that newer stablecoins like Global Dollar and M are distributing revenue to partners. However, Circle's agreement with Coinbase, signed in 2023, initially spans three years with an option for another three. It's unclear if the agreement continues rolling afterward.

The filing mentions termination clauses, but Coinbase can only terminate if deciding to launch a competing stablecoin.

Considering the agreement began in 2023, and assuming a standard calendar year, it appears this arrangement will largely conclude by 2026.

After that, the two companies will need to renegotiate their