Why USDC Growth Is Outpacing Circle Revenue After Q2 2026 Earnings

 

A stablecoin's circulation grew 19%. Its onchain transaction volume grew 151%. Its issuer's revenue grew 7%. All three numbers come from the same quarterly report, and the gap between them is the most instructive thing in the stablecoin business model right now.

 

According to Circle's second quarter 2026 results, USDC in circulation reached $73.3 billion at quarter end, up 19% year over year, onchain transaction volume hit $14.8 trillion, up 151%, and total revenue and reserve income came in at $701 million, up 7%. Reserve income of $668 million rose 5%, driven primarily by 25% growth in average USDC in circulation and partially offset by a 66 basis point decline in the reserve return rate.

 

The core issue is not decelerating growth. It is a mismatch between the form the growth takes and the way revenue is measured. USDC's intensity of use is rising rapidly, while the issuer's revenue still depends mainly on how much money sits still in the reserve pool and what that money earns in interest. Understanding that mismatch matters more than debating whether a single quarter met expectations.

 

 

 

USDC in circulation ended the quarter at $73.3 billion, up 19% year over year but down roughly 4.8% from about $77 billion at the end of Q1.

 

Average circulation for the quarter reached an all-time high of $76.5 billion, up 25% year over year and modestly higher than $75.2 billion in the prior quarter.

 

The reserve return rate was 3.48%, down 66 basis points year over year, which the company attributed to the decline in SOFR during the period.

 

Onchain transaction volume reached $14.8 trillion, up 151%, averaging roughly $163 billion per day, while daily minting and redemption averaged $1.9 billion, up 105%.

 

The quarter saw $83 billion of USDC minted and $87 billion redeemed, with redemptions exceeding mints.

 

Total revenue and reserve income of $701 million came in below the $717 million consensus, while diluted EPS of $0.18 edged past the $0.16 estimate.

 

Other revenue of $34 million grew 41% year over year but fell $8 million sequentially from $42 million.

 

Full-year other revenue guidance was raised to a range of $310 million to $330 million from $150 million to $170 million, driven mainly by a $242 million Arc token presale executed in Q2, of which roughly 75% is expected to be recognised in 2026.

 

 

 

The composition of reserve income is the part of this report that needs unpacking. The release states that reserve income of $668 million grew 5%, primarily from 25% growth in average USDC in circulation, partially offset by a 66 basis point decline in the reserve return rate.

 

The specific figure was disclosed on the call. Per the Q2 2026 earnings call transcript, the reserve return rate was 3.48% for the quarter, down 66 basis points year on year, reflecting the decline in SOFR during the period.

 

Put the two together and the conclusion is direct: scale grew by a quarter, yield fell by roughly a sixth, and after multiplying the two, 5% of increment remained. This is a multiplicative structure rather than an additive one, so deterioration at either end directly compresses the other's contribution.

 

One detail about denominators matters. The 19% figure uses quarter-end circulation while the 25% figure uses average circulation. Revenue accrues on average balances, so 25% is the measure directly tied to the income line.

 

 

Beyond the annual comparison, the sequential data offers a second view. Per KuCoin's summary of the results, average circulation of $76.5 billion rose about 2% from $75.2 billion the prior quarter, while quarter-end circulation of $73.3 billion fell roughly 4.8% from about $77 billion at the end of Q1. That indicates net outflows concentrated toward the end of the quarter.

 

The mint and redemption data corroborate it. The same summary records $83 billion minted and $87 billion redeemed during the quarter, with redemptions exceeding mints. This is not a distress signal, since daily minting and redemption volume grew 105% year over year, indicating the rails themselves are scaling. But the marginal trend warrants attention.

 

The company's own explanation points outward. Management noted on the call that the digital asset market capitalisation declined roughly 40% year over year, reducing trading activity and DeFi collateral demand, which weighed on USDC circulation growth.

 

 

 

This is the single most informative comparison in the report. Onchain transaction volume grew 151% to $14.8 trillion while circulation grew 19%. Each dollar of USDC is turning over far more frequently.

 

Structurally, average daily onchain volume of roughly $163 billion against a stock of about $73.3 billion implies daily turnover above two times. For a payment asset, that sits in a high range.

 

The problem is that turnover generates no revenue directly. Reserve income accrues on balances and is indifferent to transaction frequency. A dollar that changes hands a hundred times onchain contributes exactly as much to reserve income as one that never moves. That is the mechanical reason rising usage intensity has not translated into revenue growth.

 

 

Share data supports the reading. Management disclosed that USDC's share of stablecoin transaction volume reached nearly 70% in June, a record, up from 36% in the year-ago quarter. At the same time, per PYMNTS' analysis of the results, USDC's share of the fiat-backed dollar stablecoin market ended the quarter at 27%, down 66 basis points year over year.

 

The two are not contradictory. The first measures usage; the second measures stock. Together they say USDC's relative position is strengthening in trading and payment contexts while weakening in pure store-of-value contexts. For a product positioning itself as payment infrastructure, that is not necessarily bad, but it places a clear requirement on the revenue model: build the ability to charge for usage.

 

Platform data points the same way. The call disclosed that USDC on platform infrastructure grew 106% year over year to $12.4 billion, representing 17% of circulation, while USDC on Coinbase's platform reached 30% at quarter end, with Hyperliquid accounting for roughly 6% of that total.

 

 

 

Management's response shows up in the guidance. The release reports other revenue of $34 million, up 41% year over year on growth in subscription and services revenue, with full-year other revenue guidance raised to a range of $310 million to $330 million from $150 million to $170 million.

 

The source of that raise needs clarity. Per the call, a $242 million Arc token presale was executed in Q2, with roughly 75% expected to be recognised in 2026. In other words, the raise is driven primarily by one-time token sale revenue rather than recurring service income.

 

The recurring component was actually softer. The same record shows other revenue declined $8 million sequentially, with subscription and services revenue down $7 million on fewer blockchain integrations and transaction revenue down $1 million on lower validator rewards, which management attributed to a deliberate shift in focus toward Arc over other blockchain partnerships.

 

For investors, that means assessing diversification progress requires stripping out the token presale and watching only the subscription and services line. That line has not yet established upward momentum.

 

 

The cost side carries another structural feature. The release shows total distribution, transaction and other costs of $412 million, up 1% year over year, mostly from increased distribution payments. Revenue less distribution cost margin came in at 41.2%, up three percentage points year over year.

 

Distribution costs mean USDC's growth does not accrue entirely to the issuer. Channel partners capture a meaningful share of the economics, and channel concentration is high, with USDC on Coinbase's platform reaching 30% at quarter end. That dependency belongs in any assessment of long-run margins.

 

Adjusted operating expenses rose 23% to $146 million, driven largely by investment in product development, infrastructure and AI capabilities. Adjusted EBITDA was $143 million, up 8%, at a 50% margin.

 

For investors following this sector, tracking how USDC pair depth shifts across major venues often signals actual capital flows earlier than quarterly guidance does, and platforms listing multiple stablecoin pairs side by side, such as MEXC, make that comparison particularly direct.

 

 

 

Most analysis of this report has skipped this point. The 66 basis point decline in reserve return rate was attributed to the fall in SOFR, meaning past rate cuts. But the current policy debate has reversed direction.

 

Per CNBC's coverage of the July meeting, the Federal Open Market Committee voted 9 to 3 on July 28 to 29 to hold the federal funds rate at 3.50% to 3.75%, with three regional Fed presidents preferring a quarter-point increase, the first three-way hawkish dissent since September 2016.

 

For Circle's revenue model, that shift has direct implications. Reserve income correlates positively with short-term rates, so falling rates are a headwind and rising rates a tailwind. The 66 basis point decline in Q2 reflects cuts that already happened rather than a forecast of what comes next.

 

To be explicit, this is not a prediction of policy and does not mean yields will necessarily recover. July's vote was to hold, and market-implied probabilities move quickly with incoming data. But extrapolating the 66 basis point decline linearly into coming quarters has no basis.

 

 

The first risk is the market cycle. Management disclosed that digital asset market capitalisation fell roughly 40% year over year, with reduced trading activity and collateral demand feeding directly into circulation growth. Further market weakness would erode the scale contribution.

 

The second is the pace of revenue diversification. Other revenue growth currently depends on a one-time token presale while recurring subscription and services revenue declined sequentially. If Arc's public mainnet launch on September 16 fails to generate durable service revenue, the diversification narrative comes under pressure. The call noted that CPN annualised total payment volume reached $23 billion as of July 31, up 130% since the last earnings report, with plans to begin monetizing the network in the second half of the year. That is a concrete milestone to track.

 

The third is competition and distribution. USDC's share of the fiat-backed dollar stablecoin market slipped modestly year over year while distribution costs remain substantial and channels concentrated. Per KuCoin's analysis, Morgan Stanley cut its price target to $38 on August 3, noting that the shift from holding-based to usage-based income remains incomplete.

 

On scenarios, the base case is circulation fluctuating with the market cycle, revenue growth constrained by the product of rates and scale, and diversified revenue climbing gradually without changing the mix near term. A second is that recovering rates deliver an unexpected improvement in reserve income, allowing valuation to repair ahead of the business model transition. A third is a breakthrough in usage-based revenue, with the payments network and Arc establishing measurable pricing power, which would materially change revenue quality. There is not yet enough data to support that judgement.

 

Status distinctions: financial results and guidance come from official disclosure. Call commentary comes from public transcripts. Analyst price targets are third-party judgements. Any view on the rate path is not official guidance.

 

 

What actually matters in this report is that it quantitatively separates a stablecoin's two identities for the first time. Onchain transaction volume up 151% against circulation up 19% says USDC's value as a settlement medium is rising fast. Revenue up 7% says the issuer can currently only charge for its identity as a deposit substitute. A dollar that turns over a hundred times onchain contributes exactly as much to reserve income as one that sits still. That mismatch is a structural issue for the whole industry, not an operational failing at one company.

 

Three misreadings look likely. The first is extrapolating the 66 basis point decline in reserve return rate. That figure reflects rate cuts that already occurred, while the live policy debate has turned to whether to hike, with July producing the first three-way dissent in favour of tightening since September 2016. The revenue model's rate sensitivity runs both ways, and treating the headwind as permanent is a base-period bias. The second is reading the large guidance raise as successful diversification. The raise is driven mainly by a $242 million one-time token presale, while recurring subscription and services revenue fell $7 million sequentially. Those two carry entirely different valuation implications. The third is conflating two different share metrics. Transaction volume share near 70% in June measures usage; the 27% share of fiat-backed dollar stablecoins, down slightly year over year, measures stock. Merging them into one narrative produces the wrong conclusion.

 

Three verifiable metrics deserve tracking. First, the sequential trajectory of subscription and services revenue excluding token sales, the only clean read on whether usage-based pricing power is genuinely forming. Second, the monetization terms of the payments network, where annualised volume already stands at $23 billion but commercialisation only begins in the second half, making the take rate rather than volume the decisive variable. Third, the direction of the gap between quarter-end and average circulation. Quarter-end fell about 4.8% sequentially this period, and two consecutive quarters of negative gap would indicate genuinely weakening marginal inflows, a signal that appears earlier than annual comparisons.

 

The cross-asset lesson is that how revenue is measured determines the valuation multiple. The same business, if revenue equals balance times rate, should be valued closer to a rate-sensitive financial institution. If revenue equals transaction count times take rate, it can be valued closer to a payments network. Reasonable multiples for those two differ by several times, and the market's difficulty pricing Circle stems from its position between them, with 95% of revenue coming from the former while the growth narrative describes the latter. When evaluating any stablecoin or payments name, establish the measurement basis of revenue first and select the valuation framework second. The same principle applies to onchain protocol valuation, where usage and value capture are frequently not the same thing.

 

This analysis rests on published financial results, earnings call transcripts and credible reporting available now. The rate path, the market cycle and product commercialisation could each change the conclusion, and no single scenario should be treated as a fixed expectation.

 

 

 

Because revenue is the product of balance and rate rather than balance alone. Reserve income of $668 million rose 5%, driven primarily by 25% growth in average circulation and partially offset by a 66 basis point decline in the reserve return rate to 3.48%. Note also that the 19% figure uses quarter-end circulation while revenue accrues on average balances, making 25% the directly corresponding measure. Rising scale and falling yield offsetting each other is the mechanical explanation.

 

 

The company attributed it to the decline in SOFR during the period. USDC reserves are held primarily in short-duration dollar assets, so their yield tracks short-term market rates. The reserve return rate came in at 3.48% for the quarter, down 66 basis points year over year. Importantly, that decline reflects rate changes that have already occurred rather than a forward trend, and the current FOMC debate has shifted toward whether to raise rates.

 

 

Because reserve income accrues on balances and is indifferent to transaction frequency. A dollar of USDC that changes hands a hundred times onchain contributes exactly as much as one that never moves. Q2 daily onchain volume averaged roughly $163 billion against a stock of about $73.3 billion, implying high turnover, but the company currently lacks a pricing mechanism tied to usage. That is precisely the commercial logic behind its payments network and Arc.

 

 

It indicates net outflows concentrated toward the end of the quarter. Quarter-end circulation of $73.3 billion was up 19% year over year but down about 4.8% from roughly $77 billion at the end of Q1, with $83 billion minted and $87 billion redeemed during the period. This is not a distress signal, since daily minting and redemption grew 105% year over year, showing the rails are expanding. But the marginal trend is worth watching, particularly whether it persists next quarter.

 

 

The source needs separating. Full-year other revenue guidance rose to $310 million to $330 million from $150 million to $170 million, driven mainly by a $242 million Arc token presale executed in Q2, of which roughly 75% is expected to be recognised in 2026, making it one-time revenue. Over the same period recurring subscription and services revenue fell $7 million sequentially on fewer blockchain integrations. The accurate framing is that guidance rose while diversification itself has not yet materialised.

 

 

It depends which share you measure. Its share of stablecoin transaction volume reached nearly 70% in June, a record, up from 36% a year earlier. Its share of the fiat-backed dollar stablecoin stock market ended the quarter at 27%, down 66 basis points year over year. The first measures usage intensity, the second measures outstanding balances. Both moving together indicates USDC is strengthening in payments and trading while facing competition in pure store-of-value demand.

 

 

Three. Arc's public mainnet is scheduled for September 16 with a founding validator cohort of global financial institutions, and whether it produces measurable service revenue afterward is the key test. The payments network reached $23 billion in annualised volume as of July 31 with monetization beginning in the second half, so the take rate matters more than the volume. Third, the sequential trajectory of subscription and services revenue excluding token sales, the cleanest read on whether the revenue mix is genuinely shifting.

 

 

There is a measurement mismatch between revenue and value creation. Issuers create value through velocity, settlement efficiency and payment network reach, but earn revenue from interest on reserve assets, meaning from money that sits still. That leaves them exposed simultaneously to the rate cycle and the crypto market cycle, neither of which they control. The industry's answer is to build usage-based pricing power, but the shift from holding-based to usage-based income remains incomplete.

 

 

This article is provided for informational and research purposes only and does not constitute investment advice, financial advice, legal advice, tax advice or any recommendation to transact. The financial figures, operating metrics and guidance referenced here come from official company disclosures and public earnings call transcripts; the company's complete filed financial reports are the authoritative source, third-party analyst targets and views are those institutions' judgements rather than statements of fact, and the discussion of the rate environment is not a forecast of policy. Prices of crypto assets, equities and other related financial instruments can move sharply over short periods, and investors may lose their entire principal. Although stablecoins are designed to maintain a stable value, they carry issuer risk, reserve risk, redemption risk and regulatory risk, should not be treated as equivalent to bank deposits, and are not protected by deposit insurance. Historical performance, technical indicators and on-chain data cannot guarantee future outcomes and should not be read as a promise or forecast regarding any asset. Readers should conduct their own independent research, verify official information directly, and evaluate any decision against their own financial circumstances, investment objectives, experience and risk tolerance, consulting a qualified professional adviser where appropriate. The MEXC Crypto Pulse team accepts no liability for any direct or indirect loss arising from use of or reliance on the information in this article.

 

 

James Mitchell specializes in technical analysis, market trends, and trading strategies for both Bitcoin and altcoins. Based in London, he has over 10 years of experience in financial markets. Before joining MEXC Learn, James worked as a senior analyst at a leading European investment firm, where he developed expertise in risk management and quantitative trading. His transition to cryptocurrency markets began in 2017, and he has since become recognized for his data-driven approach. He holds a Master's degree in Financial Economics from the London School of Economics. His analytical approach combines traditional technical analysis with on-chain metrics to provide readers with actionable insights.

 

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