The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Karen Kwok

LONDON, May 22 (Reuters Breakingviews) - Circle Internet Group is coming around for another shot at an initial public offering. The issuer of USD Coin, a digital token pegged to the value of the U.S. dollar, is nearing a listing after nixing a blank-check merger in 2022. It’s well-timed, as legislators close in on a regulatory framework for these so-called stablecoins, which Citi estimates could reach $1.6 trillion in value by 2030. The dream is a crypto rival to Visa V.N and Mastercard MA.N. Yet Circle’s narrow revenue base and costly distribution make it look more like a product than a long-term independent company.

Stablecoins bridge crypto and regular money, also potentially serving as a means of sending cash around the world and as an alternative to volatile local currencies. Key to winning acceptance is assuring users that coins are backed by safe, liquid assets, ensuring they are readily redeemable for dollars. Circle’s focus on transparent accounting helps: Mastercard offers its USDC coin to users. Newer entrants will take time to build similar trust.

USDC and rival Tether account for almost all stablecoin transaction volume, according to Visa, with the firm run by Jeremy Allaire claiming an over-one-third share. The next step is winning over investors.

Right now, 96% of revenue comes from interest earned on reserves backing USDC. Revenue surged 88% year-over-year to $1.4 billion in 2023, when the rate of return on its reserve assets reached as high as 5.19%. That was up from 0.14% in early 2022, rising as the Federal Reserve increased rates. Growth slowed to 16% in 2024 as yields stabilized.

This looks perilously hostage to fortune. Getting the likes of Visa to accept USDC for remittances or business payments would help diversify. Circle already pays dearly for growth, though: in 2024, it sent some 54% of revenue to partner Coinbase, a crypto exchange, for distributing its coin.

That makes it tough to compare to Visa and Mastercard, which boasted EBITDA margins roughly quadruple Circle’s 17% last year. Still, put it at Mastercard’s valuation of 30 times, and it might be worth $8.5 billion.

This would capture the bigger picture that Circle highlights in filings. Nonetheless, present reality would seem to demand a discount. Indeed, crypto firm Ripple offered between $4 billion and $5 billion to acquire Circle, Bloomberg reported.

The company says it isn’t for sale. An exit to a strategic buyer, though, could elide the steep cost of distribution. Others see the opportunity, with payment provider Stripe acquiring stablecoin platform Bridge in February. Momentum and regulatory acceptance are building. As they do, Circle will prove valuable - but it could be more so as part of a bigger platform.

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CONTEXT NEWS

Circle Internet Group, issuer of the dollar-pegged USD Coin, submitted preliminary filings ahead of a potential initial public offering in April. The company led by Jeremy Allaire reported revenue of $1.7 billion in 2024, when it generated $157 million in net income.

Digital payment technology developer Ripple offered to acquire Circle for between $4 billion and $5 billion, Bloomberg reported on April 30, citing people familiar with the matter. The company subsequently said that Circle is not for sale.

U.S. legislators voted to advance consideration of the GENIUS Act on May 19. The bill seeks to establish a regulatory framework for digital tokens pegged to the value of the U.S. dollar, known as stablecoins.

(Editing by Jonathan Guilford; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on KWOK/karen.kwok@thomsonreuters.com))