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Circle paid out $1.4 billion in distribution costs tied to Coinbase last year. That’s not a rounding error — it’s basically half the company’s income gone before anything else gets counted.
The $1.4 billion figure, up sharply from $924.5 million the year before, ate through roughly 51% of Circle’s total revenue and reserve income for 2025. And yet USDC had a genuinely strong year. Circulation jumped 72%, hitting $75.3 billion by the fourth quarter. Full-year revenue climbed 64% to reach $2.7 billion. Circle held a 39% margin after distribution and transaction costs — same as 2024, which is either impressive discipline or a worrying sign that growth isn’t actually improving the bottom line. Probably both, depending on who you ask.
The Coinbase Agreement Comes Up for Renewal
The deal at the center of all this dates to August 2023. Circle and Coinbase put a collaboration agreement in place then, and it’s set to expire — or get renegotiated — before August 2026. If nobody changes anything, the contract rolls over automatically for another three years. That’s a big default to stumble into, given how much the competitive landscape has shifted since 2023.
Coinbase is still the primary centralized distributor for USDC. That’s not changing tomorrow. But Coinbase also participates in Open USD, a consortium that includes Visa and Mastercard, and that group splits reserve earnings among its members rather than funneling them through a single distribution deal. It’s a different model — and it gives Coinbase a reference point when it sits down to renegotiate with Circle. If Open USD terms look more favorable, Circle’s leverage gets thinner fast.
The core issue is pretty simple: Circle earns income on the reserves backing USDC, and it has to share a lot of that income with the platforms that distribute the stablecoin. The bigger USDC gets, the bigger those payments become. That’s fine when margins hold, but it creates a ceiling on how profitable Circle can actually get, no matter how fast circulation grows.
Hyperliquid’s AQAv2 Model Catches JPMorgan’s Eye
Then there’s Hyperliquid. The decentralized trading platform has its own native stablecoin, USDH, which hasn’t come close to matching USDC’s liquidity. But that’s kind of beside the point. What Hyperliquid actually does is route a substantial chunk of cost-adjusted reserve-yield revenue back to itself through something called the AQAv2 framework. It keeps USDC circulating on its platform while capturing a meaningful share of the economic value that would otherwise flow to Circle or Coinbase.
JPMorgan flagged the Hyperliquid model as a potential earnings concern for both Circle and Coinbase. It’s not hard to see why. If more exchanges and DeFi platforms adopt similar structures — keeping USDC’s liquidity benefits while clawing back reserve income — Circle’s share of that income shrinks without any corresponding drop in distribution costs. You’d get more USDC in circulation and less money coming back to Circle per dollar of reserves. That’s a bad combination.
And it’s not a hypothetical. The AQAv2 framework is live. The question is whether it spreads.
Circle’s Trust Bank Approval Adds Some Leverage
Circle did get some good news on the regulatory front. The company received approval to establish a national trust bank, which gives it a credential most competitors don’t have. That kind of regulatory backing could matter in negotiations — especially if partners without similar approvals are trying to push for better economics. It’s not a trump card, but it’s something.
Still, the pressure is real. If major exchanges start demanding Open USD-style revenue sharing, or if more DeFi platforms build out Hyperliquid-style frameworks, Circle’s current slice of reserve income gets contested from multiple directions at once. The $1.4 billion Coinbase payment in 2025 is already a lot. A renegotiation that pushes that number higher — or that locks in similar terms for another three years — could weigh heavily on margins that have stayed flat despite enormous top-line growth.
The August 2026 talks with Coinbase are basically the whole ballgame for now. Circle’s ability to hold its economic position depends on what gets agreed to in those conversations, and on whether the AQAv2 model stays a Hyperliquid-specific thing or becomes the new baseline expectation across the stablecoin ecosystem.
USDC circulation hit $75.3 billion in Q4 2025.
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Frequently Asked Questions
How much did Circle pay Coinbase in distribution costs in 2025?
Circle paid $1.4 billion in distribution costs linked to Coinbase in 2025, up from $924.5 million the previous year, representing about 51% of Circle’s total revenue and reserve income.
What is the Hyperliquid AQAv2 framework and why does it matter for Circle?
AQAv2 is Hyperliquid’s framework that routes a substantial portion of cost-adjusted reserve-yield revenue back to the platform itself. JPMorgan flagged it as a potential earnings concern for Circle and Coinbase because it lets platforms capture stablecoin economic value that would otherwise flow to Circle.
