Circle wants to IPO, and its S1 filing details the staggering difference between the regulated, US-based stablecoin issuer and its offshore competitor, Tether.
Despite their relatively similar sizes, the financials of the world’s two largest stablecoin issuers are miles apart.
As of December 31, 2024, there were 137.4 billion circulating USDT and 43.9 billion circulating USDC. Despite USDC’s market capitalization being approximately one-third of USDT, their profitability diverges massively.
Specifically, Tether reported a gross profit of $13 billion that year, while Circle reported just $156 million in net income.
Specifically, Tether reported a gross profit of $13 billion that year, while Circle reported just $156 million in net income.
In percentage terms, the market capitalization of USDT was just 213% bigger than USDC, yet its profit was roughly 8,000% bigger. It certainly begs the question of how Tether achieved its extraordinary gains.
Cheap books offshore, expensive books onshore
Similar to Tether, Circle backs its USDC with plenty of interest-bearing US Treasury bonds. Unlike Tether, however, it has substantial fees to partners like Coinbase.
Also unlike Circle, Tether claims to rank among the most profitable companies per employee in the world. Its less than 200 employees apparently generated more than $65 million in gross profit per person last year.
Circle, in contrast, paid out more than half its revenue, or about $900 million last year, to Coinbase for “distribution fees” to Coinbase’s customers and to rank as the exchange’s preferred stablecoin. Tether makes little if any similar incentive payments.
“For the year ended December 31, 2024, we incurred $907.9 million of distribution costs in connection with our agreements with Coinbase. We expect our distribution expense to increase in the future as we add distributors and approved participants. Our distribution expense will also increase to the extent our reserve income increases over time.”
-Circle S-1 filing
Circle paid out about $900 million last year in Coinbase “distribution fees.”
Worse, Tether has never filed a Securities and Exchange Commission filing nor any going-public document that would subject it to Financial Accounting Standards Board definitions or record-keeping.
Instead, it avoids audits and uses non-standard terminology that makes it difficult to perform an apples-to-apples comparison.
Read more: Howard Lutnick wants Tether to get an audit
Indeed, Tether does not specify its 2024 net income, which is a controlled term. Instead, it simply reported $13 billion in “gross profit” without acknowledging any generally accepted accounting principles.
Comingled profits and few definitions
Worse, Tether did not specify how much profit it earned specifically on assets backing USDT versus its other assets like XAUT, CNHT, or MXNT. Therefore, although we know that the overwhelming majority of the $13 billion derives from assets backing USDT, no one besides Tether knows that precise quantity.
Tether Holding Group’s activities also include a far wider set of assets than Circle, investing as it does in a variety of different firms in an attempt to find additional yield.
No matter what, Tether claims to sit worlds apart from its nearest competitor in terms of profitability. Despite just a low triple-digit size difference, the profitability differential between Tether and Circle is high-quadruple digits.
Maybe Tether is just better at business than Circle. Maybe it is benefitting from historical lies or an alliance with Donald Trump’s administration. Maybe something else explains the wild discrepancy.
