Circle's reserve income fell as rates dropped, even with more USDC in circulation

Circle Internet Group (NYSE: CRCL), the issuer of the USDC stablecoin, earned $658 million from the reserves behind its tokens in the third quarter of 2026, 8% less than a year earlier, even though the average amount of USDC in circulation grew 8% to $73.3 billion, the company said in its quarterly results. The quarter shows how closely a dollar stablecoin's main income follows short-term US interest rates, which the Federal Reserve may raise again in December.

How a stablecoin issuer earns its money

A dollar stablecoin is a token that its issuer promises to redeem for one dollar. Circle holds reserves, mostly cash and short-term government instruments, against the tokens in circulation, and keeps the interest those reserves earn. Holders of USDC receive none of it, and the federal stablecoin rules being written under the GENIUS Act restrict paying interest to holders, as FinanceInTime reported on the OCC's final rule.

That makes two numbers decisive: how many tokens are outstanding, and what the reserves earn. Circle calls the second the reserve return rate.

Circulation grew; the rate fell faster

Circle said reserve income fell "primarily from a 61 bps decline in the Reserve Return Rate, partially offset by 8% growth in average USDC in Circulation." Dividing $658 million of quarterly reserve income by $73.3 billion of average circulation gives an annualized return of about 3.59% (computed, a rough guide because circulation changed during the quarter).

Market rates moved in the same direction. The 3-month Treasury bill yield averaged 3.94% over the third quarter of 2026, against 4.26% in the third quarter of 2025, a decline of 32 basis points, according to the Treasury's daily yield curve (computed from 64 daily readings in each quarter). The Fed's target range began the third quarter of 2025 with an upper limit of 4.50% and the third quarter of 2026 at 3.75%, according to Fed data compiled by the St. Louis Fed. Circle's 61-basis-point decline is larger than the fall in the bill yield and smaller than the gap in the policy rate; the release does not break down the composition of the reserves, so the data do not show why.

Without the token sale, revenue shrank

Total revenue and reserve income was $865 million, 17% more than a year earlier, Circle said. But other revenue of $207 million included $182 million from the presale of ARC, the network token of Circle's new Arc blockchain, which the company said lifted that line 627%. Excluding the presale, revenue and reserve income was $683 million (computed). Reserve income made up 76.1% of the quarter's total (computed).

The costs that move with reserve income fell too. Distribution, transaction and other costs, mostly payments to partners that distribute USDC, were $412 million, down 8% "mostly from decreased distribution payments," the company said. Those costs equal 62.6% of reserve income (computed), so much of any change in reserve income is shared with distributors.

Net income was $226 million, up 5%, and adjusted EBITDA $317 million, up 85%, which Circle said reflected "the ARC token presale revenue and lower distribution costs."

Third quarter 2026	Amount	Change from a year earlier
Average USDC in circulation	$73.3 billion	+8%
Reserve income	$658 million	-8%
Other revenue (incl. $182 million ARC presale)	$207 million	+627%
Distribution, transaction and other costs	$412 million	-8%
Net income	$226 million	+5%

Source: Circle Internet Group, third-quarter 2026 results.

The rate has turned since the quarter ended

The Fed raised its target range by a quarter point to 3.75%-4.00% on September 16, in the last weeks of the quarter, according to its statement. Since then, the 3-month bill yield has averaged 4.22% from October 1 to November 10, 28 basis points above the third-quarter average (computed from 28 daily readings).

On $73.3 billion of circulation, every 0.25 percentage point of reserve return is worth about $183 million a year, or about $46 million a quarter, before distribution payments (computed). That is an illustration of sensitivity, not a forecast of Circle's results.

Fed Governor Christopher Waller said in a speech on November 10 that he "would still support a 25 basis point increase in the FOMC's policy rate at our December meeting," and that a 50-basis-point rise "should be considered" if core consumer prices kept rising about 0.3% a month. The committee meets on December 8-9, according to the Fed's calendar.

Circulation is the other half. Stablecoin supply stalled in October, as FinanceInTime reported, and the Fed proposed in September a framework for the stablecoin issuers it would supervise under the GENIUS Act, according to its press release.

A business that the Fed helps more than its own growth

We think Circle's third quarter is the clearest evidence yet that a stablecoin issuer's income is, for now, a bet on short-term interest rates. An 8% rise in average circulation could not offset a 61-basis-point fall in what the reserves earn, and the headline revenue growth rested on a one-time token presale.

The threat is the reverse of the past year: if the Fed's rise in September proves the last and rates fall again in 2027, issuers would need circulation growth well above 8% to keep reserve income flat. The opportunity is what the payments partnerships Circle lists could do to circulation, and, in the near term, the higher bill yields since September, which on our reading of the figures above should lift fourth-quarter reserve income if circulation holds. We would change that view if USDC circulation falls in the fourth quarter. We make no forecast for any token's or share's price, and our line does not recommend any token, fund or exchange.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.