Crypto Beginner's Study Notes: The Rise of Stablecoins - A Look at Circle's IPO

I knew very little about crypto before. However, starting in the last quarter of 2024, a series of major developments brought the industry much closer to my life including the passing of the Genius and Bitcoin bills, Circle’s IPO, and MicroStrategy’s massive rally, to name a few. It felt like two worlds were converging: the once-abstract, distant crypto universe, existing only on something called the blockchain, was now entering familiar domains like exchange platforms and payment products. It becomes really hard to ignore.

So, I decided to give it a shot and start educating myself on the fundamentals, just to avoid falling too far behind. Luckily, Circle had just gone public. Along with its impressive stock rally, Circle released a 300-page IPO report that turned out to be an excellent learning resource. With the help of ChatGPT, I started my journey from there - and decided to share my learning notes publicly.

Before diving in, I asked myself four key questions to guide my thinking:

1. About Stablecoins: What role will stablecoins play in the future of finance?
2. About USDC: What makes USDC unique among all stablecoins?
3. About Circle: What is its business model and future potential?
4. About Myself: As a beginner, how can I participate in this secular trend?

What Role Will Stablecoins Play in the Future of Finance?

The first layer of the question is easy to grasp: the role of stablecoins in the Web3 ecosystem. They serve as a foundational layer, much like TCP/IP did for the Web2 era. They enalbe connectivity between Web2 and Web3, bridge cross-chain assets, and support DeFi activities. For everyday users, the key is that stablecoins are pegged to the USD, allowing us to participate in the crypto world without being exposed to volatile asset swings. Even without engaging in trading, we can already benefit from their money market fund-like yields, backed by short-term U.S. Treasuries. From there, we can branch out into more volatile crypto assets or explore DeFi opportunities such as liquidity farming and lending.

The second layer is more complex: what role will stablecoins play in the broader financial world? Right now, the main use cases revolve around payments and remittances.

For those living in China, we’ve long benefited from the convenience of platforms like WeChat Pay and Alipay. But in many other developed countries, people still struggle with outdated infrastructure like ACH and SWIFT - systems built 50 years ago. A basic cross-account transfer can take 3–5 business days and involve hefty fees. And they take the weekends-off. In many developing countries, the situation is even worse. Besides poor infrastructure and high costs, people face serious currency risk. A sudden spike in inflation can wipe out half of one’s savings - as seen recently in Argentina and Egypt.

Fintech innovations have been trying to tackle these pain points, and stablecoins offer one of the most promising solutions. Why? 1) Pegged to USD at a 1:1 ratio; 2) Near-instant cross-chain transfers, 24/7; 3) Very low transaction costs; 4) Programmable dollar - enabling flexible, use-case-specific payments

However, not everyone buys in this narrative. Just a few days ago, the CEO of Airwallex, a cross-border payment unicorn, argued that stablecoins fall short especially when it comes to off-ramping to fiat. Specifically: 1) They don’t offer competitive FX rates for G10 currencies in wholesale use cases; 2) Transfers back to bank accounts are slow; 3) They don’t provide unique value over existing fintech solutions.

While his points may hold in mature markets and large-volume B2B transactions, I think they miss the mark when it comes to developing countries and individual users. During my travels in LATAM and Africa, I saw firsthand how existing solutions often fall short. In Kenya, for instance, most payments run through MPESA, a widely adopted fintech tool, yet transaction fees often exceed 1%, not to mention the risks tied to volatile currency exchange rates. That’s where stablecoins still shine, offering faster, cheaper, and more stable solutions for individuals and cross-border users in underserved markets.

Additionally, as the Web3 ecosystem grows, more users are adopting stablecoins not just for transactions, but as a long-term store of value. In doing so, they avoid the need to off-ramp into fiat entirely, effectively removing the last-mile friction. This deepens network effects and boosts stablecoins’ long-term potential.

What Makes USDC Unique Among Stablecoins?

Major stablecoins include:

1. USDT: The largest, with ~70% market share and the highest liquidity; widely used outside the US/EU.
2. USDC: The second largest, with ~25% market share and over 80% supply growth in the past year; well-accepted in regulated US/EU markets.
3. Emerging players: FDUSD (launched in Hong Kong), PYUSD (by PayPal), and Ethena (which uses trading strategies to offer higher yield).

USDC’s growth depends both on the long-term industry beta and its relative market share within the stablecoin sector. Its key advantages include:

1. Regulatory Approval: USDC is licensed in the US and EU, the world’s most powerful financial hubs. Unlike USDT, which lacks formal licensing in these markets, USDC is positioned to attract institutional capital that values compliance.
2. Transparency and Credibility: Circle holds its cash reserves with BNY Mellon and BlackRock and publishes regular reports. Now that it’s a public company, it will also face routine audits, further reinforcing investor trust.
3. Cross-chain Flexibility: Through CCTP (Cross-Chain Transfer Protocol), USDC enables seamless and secure movement across different chains.
4. Developer Accessibility: Circle abstracts away blockchain complexity by offering APIs that make it easy for Web2 companies to integrate programmable payments, an important distribution channel going forward.

In short, USDC is a credibility play - built for regulatory compliance and institutional adoption. Think of it like a large-cap stock: less flashy, but favored by long-term, risk-averse capital. As more institutional investors enter the crypto space, they’re likely to gravitate toward USDC, accelerating its dominance.

By contrast, USDT is a retail and trader play - with easier KYC, high liquidity, and lower fees. It’s heavily used by individual investors, especially in emerging markets and crypto-native circles (e.g., Asia and the Middle East). It’s the equivalent of a retail-trader hot stock - volatile, liquid, and heavily transacted.

Other stablecoins are trying to carve out niches: Ethena uses trading strategies to offer better yields, and PYUSD leverages PayPal’s massive user base. However, the stablecoin industry has strong network effects. Leaders benefit from scale advantages - better liquidity, more trust, and faster innovation. That’s why USDT and USDC are likely to keep growing their leads.

Now that USDC is licensed in both the US and EU, it stands to attract even more institutional capital. Its close ties to U.S. regulatory frameworks suggest another wave of momentum may be on the horizon.

And since Circle is the sole issuer of USDC, everything above also informs how we evaluate Circle as a company. Let’s explore further.

What’s Circle’s Business Model and Future Potential?

Circle’s business model is quite straightforward. As of now, 98% of its revenue comes from interest income, earned by placing customer funds into short-term U.S. Treasuries. This model benefits from today’s high interest rate environment but is also highly sensitive to Fed policy. The remaining 2% comes from on-chain transaction fees, high-volume redemptions, and payment service charges. Management has guided that in the future, they aim for a 75/25 revenue split between interest income and platform-based services.

Circle’s future depends on three key factors:

1. USDC Volume Growth: Already covered above: robust secular growth, especially in regulated and institutional channels.
2. Interest Rate Outlook: Outside of Circle’s control. Today’s high-rate environment is unlikely to persist long term.
3. Distribution Ecosystem: Perhaps the most unpredictable factor.

Although USDC issuance is dominated by Circle, distribution remains highly competitive. This raises the question: Who holds the power, the issuer or the distributor?

From its IPO filings, Circle paid Coinbase nearly $900M in distribution fees, nearly half its 2024 gross profit. Coinbase alone accounts for 24% of USDC’s volume. Meanwhile, PayPal has launched its own stablecoin. Stripe acquired stablecoin issuer Bridge. Other fintechs are also exploring this space. So, what’s the endgame?

1. Will USDC dominate user mindshare and force distributors to plug into its ecosystem?
2. Or will distributors build their own stablecoin ecosystems, overcoming regulatory and technical barriers to claim the interest income themselves?

It’s hard to say. I don’t know the industry well enough to make that call. But drawing on my experience in consumer and consumer finance sectors, I’d argue that stablecoins, aiming to become the future financial infrastructure, would need 1) Institutional and regulatory support; 2) User trust and familiarity; 3) Strong technical architecture. All of this points to network effects: Better credibility → More ecosystem partners → More use cases → More users → More reinvestment → Better infrastructure. Since distribution will remain fragmented, it’s unlikely that individual platforms will be able to scale their own stablecoins to rival Circle or Tether. A parallel from China: many platforms tried to steal share from WeChat/Alipay with their own payment products using heavy subsidies, but couldn’t make it happen. This is my current superficial and high-level read.

How Can a Beginner Participate?

Here are a few ideas I brainstormed with ChatGPT (none of which are investment advice):

1. Direct Investment in Circle: Circle’s stock has already soared post-IPO. I completely missed the early opportunity. Now the price feels too high for my targeted range. Headwinds ahead include profit-taking by early investors, Fed rate decisions, broader market pullbacks, and regulatory uncertainty. If any of those cause a meaningful dip, that might present a better entry point.
2. Stablecoin Yield Opportunities: Many CEXs are promoting stablecoins with attractive yields. These could be explored as short-term cash management tools.
3. DeFi Opportunities – The DeFi world continues to innovate. Many platforms allow users to participate directly with stablecoins. These opportunities can offer high yields but come with significantly higher risks — and demand much deeper research to understand.

One last thing that struck me from Circle’s report was the founder’s journey. They launched the company in early 2023, when most people still saw crypto as a scam. They’ve weathered numerous ups and downs but never gave up. Looking back, what moved me most wasn’t just the company or industry analysis, it was their resolve to build when no one else believed, and their grit to persist under skepticism and pressure. That spirit, more than anything else, made my IPO report reading experience a lot more enjoying.