Q3 2025 Circle Internet Group Inc Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator. Today, at this time, I would like to welcome you to the Circle Group.

Circle internet group, third quarter 2025 earnings conference. Call all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number 1 on your telephone keypad. And if you'd like to withdraw that question again, press star 1, thank you. I would now like to turn the conference over to John Andrews, vice president of capital markets and investor relations John.

Thank you, operator. And good morning. I'd like to welcome you to circle's third quarter 2025 earnings call, I'm joined by Jeremy Lair. Our co-founder chief executive officer, and chairman, and Jeremy Fox Keane. Our Chief Financial Officer

Earlier this morning, we posted our earnings press release and earnings presentation on the Circle Investor Relations website, investor.circle.com.

The transcript of this call will be posted on that website once available.

I do need to remind everyone that our earnings press release presentation and this call contains statements that are forward-looking.

the events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements

information concerning risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings

We will also disclose non-gaap Financial measures on this call today. Definitions of those non-gaap financial measures and reconciliations to the most comparable. Gaap Financial measures can be found in the earnings, press release and earnings presentation, which are posted on circles investor relations website. Investor.org circle.com, non-gaap Financial measures should be considered in addition.

To not as a substitute for GAAP measures.

Thank you, John.

I'm excited to talk with all of you today about our quarterly results and general outlook.

But before I do, I want to talk about our broader vision for what is taking place in this market, a vision of an Internet Financial system that guides what we're building towards at Circle.

An open software infrastructure? Would collide with the Global Financial system and ultimately transform it.

What we are seeing emerge is the opportunity to build a full stack internet Financial platform company with several platform layers.

These infrastructure layers will be part of migrating coordination. Governance, value storage, Financial contracts and other forms of economic intermediation, into a software powered and agentic economic system.

This is an enormous platform and infrastructure opportunity that we believe is even larger than any past internet platform. Technology.

On top of these economic OS is, is the second platform layer of digital assets.

This includes stable coins.

Internet-native digital assets based on protocols and applications.

A broader tokenization, including the tokenization of traditional assets and many other types of economic contracts.

All of these digital assets will be built on the first layer of blockchain networks: the economic OSS for the Internet.

With that backdrop, I want to discuss our latest results.

This increasing velocity of money is a crucial feature of the internet Financial system.

We had strong financial results in the third quarter, we realized 740 million dollars in total revenue and Reserve income representing 66% year-on-year growth.

With a 57% adjusted EBITDA margin.

We saw Circle payments Network product expansion, with multiple product, releases and significant growth in transaction volumes and we've continued to expand our stablecoin Network, across more chains with 5 new chain, launches and 28 supported chains today.

Part of our deep commitment to maintaining a strongly Market neutral position.

And adoption has been expanding across. A range of use cases, Industries and types of firms.

Overall, the stablecoin market has continued to grow strongly, and Circle continues to gain share.

On a year-over-year, basis, stablecoins, and circulation, grew 59%.

Because we grew faster than the overall Market Circle. Share grew to 29% in the third quarter.

Approximately 130% year-over-year with USDC share. Expanding to 40% in Q3.

And as you can see, the dollar, stablecoin space remains a market with 2 leading issuers, and a number of much smaller players as we continue to sustain our strong position.

Despite increasing competition.

Part of our competitive position are durable and Powerful Network effects, that are anchored in several areas.

The trust that we have been trying to build in our infrastructure by being regulated, audited, public, transparent, and compliant.

The core liquidity infrastructure. Are reserved infrastructure with systemically important Banks and banking connectivity around the world providing at-scale minting and Redemption.

But also our broad distribution across blockchain networks and ecosystems which has helped sustain the broader utility of our Network.

Which provides powerful infrastructure for application developers, Financial infrastructure companies and others to build on.

crucially, we have been able to maintain our competitive position by being a market neutral infrastructure that leading companies can build on top of

Our stablecoin network growth remains strong.

As I already noted on-chain transaction, volume grew to 9.6 trillion in the quarter up from 5. 9 2.

Cctp our cross-chain transfer protocol is a key infrastructure in enabling Capital efficient and secure transfers of digital dollars, across blockchain networks, applications and services.

Cctp volume groups approximately 640% year-over-year to 31.3 billion in Q3.

And in fact, over the quarter of all bridged, volume of all assets, from major Bridge providers, that we track cctp represented, 47% of, all of that traffic.

In October, it was over 50%.

This is really key. As we think about the expanding role that Circle can play in providing infrastructure that supports broader cross-chain interoperability for digital assets.

We're continuing to gain share in digital asset, trading markets, as well. It's a key priority for us and you see this in our growing share of spot trading year-over-year and in the ongoing expansion of the usdc within Perpetual markets in particular on platforms such as binance, the world's largest centralized exchange and Hyper liquid the largest decentralized Exchange.

From June 30th to November 8th, we've seen our Money Market Fund more than triple in size to approximately $1 billion, making it the second largest TMM in the world.

This is an important part of our growth in tokenized collateral for digital asset markets.

And use case expansion and adoption is growing.

We're seeing adoption in capital markets, in payments in the digital assets ecosystem with banking infrastructure providers and to provide dollar access around the world, including with leading companies such as brexit, Deutsch Force, fireblocks finastra, Kraken, and now the largest bank in Latin America.

These are all key, use cases, with industry-leading companies that chose to work with circle and which will be important to the ongoing growth and Adoption of our stablecoin Network.

Coming back to this idea of building, a full stack internet platform company.

Circle has been methodically building infrastructure. That goes down the stack into the core Network. Operating system layer with Arc and moving up the stack into the application utility layer with CPN.

With Arc, we've just delivered a critical and significant milestone in recent weeks with the launch of the Arc Public Testnet.

When we think about this layer of infrastructure, we really look at it. As an operating system layer, an economic OS for the internet.

Over prior decades. There have been fundamental platform shifts for how software infrastructure supported growth in the utility of the internet.

The web as an OS for information and data.

The evolution into Mobile as an organizing operating environment Cloud as an operating infrastructure.

And then other core utilities such as social search and commerce, helping to organize ecosystems platforms and activity.

2. New major operating system. Paradigms AI platforms and blockchain platforms.

With Arc, we've created. Something that is enterprise-grade and purpose-built to bring stablecoin finance and real world economic activity on chain.

Our public testnet launched with over a 100 world-class companies spanning every major category of the financial industry. Major payments firms, technology companies, fintechs and Broad support across the digital asset markets industry.

From Apollo to AWS, BlackRock HSBC, MasterCard Standard Chartered visa and so many other tremendous firms who are testing evaluating and collaborating with circle. As we seek to bring Arc to commercial mainnet launched in 2026,

We've also been activating Arc across our entire circle product Suite, making it seamless for developers, and all participants in the ecosystem to take advantage of this new infrastructure from Circle as they prepare for Ark maintenance.

Our vision for Ark.

Is of a globally distributed network with infrastructure, operators, All Around the World in every region of the world, from every economic system in the world. And we envision strong, stakeholder incentives and governance to help Drive the adoption and evolution of this network.

Consistent with that thinking circle is actively, exploring the introduction of a native token on the ark Network.

This is an exciting development that we're actively looking at and we'll share more as we continue our exploration.

We are also seeing strong early momentum for Circle Payments Network, and we've expanded the CPN product portfolio. We launched CPN Console, which brings self-service operations to CPN members for onboarding, integration, and operating payment flows on behalf of their customers.

This will streamline our ability to bring more members and more institutions onto the network.

CPN, Marketplace itself has continued to expand as I'll talk about momentarily.

And we launched a new capability called CPN payouts which is purpose-built for automated stablecoin payouts on CPN.

We've seen the number of financial institutions enrolled on the network grow to 29.

We've also seen more and more institutions that are actively engaged in eligibility reviews to integrate to our Network, including 55 financial institutions.

And the overall pipeline of financial institutions seeking to join, CPN has grown to 500.

Across these participants are Global systemically important Banks. Payment service providers cross border firms. Neo Banks digital asset firms and many others.

We've continued to expand the markets where CPN is available.

With live flows happening across Brazil, Canada, China Hong Kong, India, Mexico Nigeria, and the United States.

and we expect upcoming launches for flows into Colombia the European Union, the Philippines Singapore, the UAE and the United Kingdom to name a few

we've also been seeing strong early adoption with rapid growth in cpn's monthly total payment volumes,

From our first full month, only 5 months ago to November 7th, we've seen over a hundred times growth in trailing 30-day payment volumes, as of last Friday annualized, transaction volume based on trailing 30 days is 3.4 billion dollars.

We're excited about this expansion of circles platform continuing to build out what we believe can be 1 of the most significant and broadly adopted internet Financial Platforms in the world.

With that. I'm pleased to turn this over to Jeremy foxkin for the financial review.

Thank you, Jeremy and good morning everyone. 2025 continues to be a year, defined by growth and I'm pleased to report. We continued this momentum in the third quarter, delivering strong financial results.

I'll start by briefly recapping, the fundamentals of our business and financial models.

Stable coins are a network business and successful networks are enduring and valuable our strategy remains to grow and deepen our Network.

We earn Reserve income on the assets. Backing our stable coins and we incentivize strategic Partners to grow distribution and our Network.

Over the last year, we have expanded our Revenue lines and now are on other revenue from certain of our transaction flows and network infrastructure.

And as an internet platform business, you have a highly scalable model with strong inherent operating Leverage.

Let me now review the quarter.

Usdc in circulation was 73.7 billion a quarter end, more than doubling year-on-year and growing faster than the overall Market.

Usdc held within circles, platform infrastructure, grew nearly 14 times a year on year to 10.2 billion at quarter end, representing 14% of total circulation.

As increasingly, we are seeing leading institutions build Upon Our platform.

Reserve return rate was 4.15% for the third quarter down, 96 basis points year on year reflecting the decline in sofa during this period.

Total revenue and reserve income increased 66% year-on-year to $740 million for the quarter, as growth in USDC circulation was partly offset by the lower reserve return rate.

Total distribution, transaction, and other costs increased 74% year on year to $448 million.

The increase was driven primarily by higher average usdc balances held on coinbase's platform and other distribution incentives as we continue to build Partnerships to drive growth and adoption.

RLDc margin was 39.5% in the quarter, down 270 basis points year-on-year. However, it strengthened by 133 basis points sequentially from the second quarter, reflecting the impact of growth from certain higher-margin products and partners.

Other revenues which are high margin and scalable increased to 29 million from less than 1 million in the prior year, reflecting the new products and services launched. Since the second half of 2024

Subscription and services Revenue was 23.6 million in the third quarter, primarily from revenue, from our blockchain Network Partnerships, we added 5 new changes this quarter and 12 new changes this year.

Transaction Revenue was 4.7 million.

Total revenue and Reserve income less distribution transaction and other costs grew 55% year-over-year to 292 million.

Adjusted operating expenses, which exclude depreciation and amortization, digital asset gains and losses, and stock-based compensation, grew 35% year-over-year to $131 million for the quarter. As we continue to invest in growing our platform and distribution at this pivotal time for our industry.

Notably, this measure includes payroll taxes, which since our IPO also includes payroll taxes on stock-based compensation.

These new payroll taxes on stock, comp was 5 million in the third quarter.

Adjusting for these new payroll taxes to make for a cleaner comparison, our underlying adjusted operating expenses grew 29% year-over-year,

But dog grew 78% year-over-year to 166 million reflecting the strong operating leverage inherent in our model.

Adjusted ebit, Dom margin expanded both year-over-year and sequentially to 57%.

Let me conclude with a brief update on our outlook.

We are at the beginning of meaningful, shifts in the global markets for money, and we manage our business for long-term success. Moreover, several of our core performance. Drivers are visible to the market in real time.

As such, we do not give detailed quarterly or full Financial guidance.

We do however, provide full year guidance on certain metrics to help our investors better. Understand our expected performance.

We will update this guidance when we expect our performance to materially deviate from that guidance.

A usdc circulation Outlook, is a long term and through cycle and remains unchanged.

We are increasing other Revenue full year. 2025 guidance to 90 to 100 million.

As a result of strong subscription and services Revenue in Q3, and underlying growth Dynamics in transactions Revenue.

We expect rldc margin to end the year around 38% at the high end of our range.

Reflecting strong on platform performance.

We are increasing our adjusted operating expenses for the year to 495 to 510 million reflecting growing investment in building. Our platform capabilities in global Partnerships.

This also reflects the impacts on payroll taxes related to the potential future exercise of options by Circle employees.

Overall, we've delivered a strong third quarter with meaningful growth and margin expansion. We're only just beginning to attack the opportunity before us and remain excited about our future. I want to thank the team here at Circle for your continued hard work. And thank our investors and analysts for your support and engagement.

With that operator. We can now start the Q&A portion of the call.

And your first question comes from Pete. Christensen with City, please go ahead.

Good morning, thank you for the question. Uh, really great Trends here. Uh, pretty impressive. Uh, particularly with CPN, I want I want to, I want to double click into some of the CPN results. Um, how do you, how should investors, think about? Uh, the pipeline developing here, you have 55, uh, new partners in review, a huge pipeline of 500. Um, how how should we think about the conversion into, um, a full users? And then as a follow-up, if, if you can give us a sense of of of how Circle intends to monetize uh CPN whether directly or indirectly, thank you so much.

Yeah, thanks. Thanks for the question, Pete. This is Jeremy are, um, yeah. We're we're we're very pleased with how CPN is progressing. Uh, obviously we we uh, we announced it in the spring. We went online. We've seen really good traction. Um, a couple things I'd say. I think the first is, you know, we've we've really been focused on making sure that we've got great.

Product and operations, that we are confident in that can scale membership and activations. And so, we've made a lot of progress there and, and you're seeing that, uh, in, in, uh, in the results in some of the other data points that I shared, um, for us, uh, this isn't all about, you know, total size of the number of members on the network. Although we do expect to continue to grow, the total size of the members on the network, but we're focused on um, adding markets. Not just adding markets, uh, for the sake of saying, hey, we can we can we can flow money here and there, but adding quality participants participants that have meaningful flows participants that want the benefit of a multilateral framework like this. Participants that have good reach into businesses Enterprises, uh, consumer retail, Etc. So sort of quality not quantity, I would say. Um, and you know, ultimately we want to make sure and this is part of the when we we talked about

Eligibility and the eligibility reviews. We're looking at a lot of things we're looking at, you know, how strong is their local liquidity against kind of, uh, local banking systems and currencies and their ability to meet the slas of the network, uh, and things like that. So we're I underwriting for Quality, uh, operational capabilities and the like, um, and uh, you know, I I think, um, we're again, very pleased, uh, with the progression, uh, and the progression of of

Tpv. Uh, both the kind of monthly tpv and the annualized tpv Run rate that uh that we shared

On monetization, just for the follow-up on my, ADD a couple of points. The first is to say with Focus. Now, on growing the network, we're not focused on monetizing the network or extracting value. We want the network to grow. So that it's creating value for all participants in an increasing way and that's how networks grow and become valuable over time, there are many opportunities for very small fees which benefit these new more efficient internet scale architectures, you want to charge much lower fees than traditional models and build businesses at much higher scale. I would just add very quickly, um, you know, the the members on their Network can make money. This is these are flows where they have fees for their users, and for the businesses that use this and, and for, uh, and obviously, for ultimately the kind of currency flows that happen as well. And so this is, I think an attractive platform that adds value to these members products, services and offerings where they can certainly generate value. And we want to scale that up.

Uh, so, um, you know, more to come there. I think we're, you know, we're we're excited about integrating Arc into CPN, uh, and and kind of new infrastructure that can support, uh, these mainstream payment flows on, uh, on the network.

Thank you, Jeremy. That's a very useful Point. Thank you.

You are next question. Comes from the line of Jeff Canwell, with C Port Research. Please go ahead.

Hey, thank you. I wanted to ask you on um, in October.

Chris Waller from the feds spoke at a payment Innovation conference. And he said,

Part of that Revolution, curious about your reaction was to that.

And do you think Circle has a seat at that table as defense starts? Uh likely starts to look more closely at crypto here.

Yeah, thanks for the question, Jeff. So we're 100% in alignment with Governor Waller. Um, and, you know, today circles infrastructure, um, whether it be our stable coin, Network infrastructure, usdc itself are cross-chain infrastructure, are are actually fundamental to this on-chain and defi based uh uh Financial system. That's emerging. And in fact, we we maintained a very strong uh uh leadership position in in the defi based onchain world. And I think our our competitive strength there has grown uh, over time. Um, I think the bigger idea which I think Governor Waller is getting at is that the ability to uh, kind of take what we think of as the building blocks of the financial system and move those into code and smart contracts and and tokenized assets that run on the Internet is like a wholesale architecture shift and a represents a major change in the

Actual, uh, underlying design of the Global Financial system, from digital cash instruments, like stablecoin money, uh, to financial contracts and financial Market, Primitives. All expressed in code. And that is at the very heart of the thesis of circle. We, we we keep talking about building the internet Financial system. We believe there is a, a large-scale change. In there will be this large internet Financial system. We see it already in, you know sort of forming today and circle, intends to be the leading internet uh platform company uh for this new internet Financial system age. So I think it's very encouraging that the leaders of central banks uh that the leaders of of global institutions are seeing this as well and are and are, you know uh affecting policy but also technology and and and business uh practices that are really aimed in this direction.

Great appreciate that. And then um, follow up I had for you, is you're at 29% Mark heads quarter last quarter, you are 28%. So you're just stepping up there to register.

Talking more about where the sharing day, this is our materializing for you guys. I'm curious if we see any notable change in the US, demand for usdc in particular, approach to policing in Virginia, this act or whether a Clarity has been helping out in any way with the share games you're seeing here, thanks.

I'm I'm happy to take that. So, uh, you know, we as as noted, we saw very strong growth in in Q3, uh, I think that growth, uh, has come from, uh, yes, the regulatory Clarity, but also, I think the, uh, the overall just advancements in the technology and and all of that combined is leading towards more Market activity. More major financial institutions payments firms. Neo Banks, large Enterprises, who are, uh, implementing stablecoin in their products and services. We we mentioned a number of of major firms that we saw, uh, in in the quarter and that, you know. So that that is effectively a, a very strong set of tailwind. And I think in a world where not just in the US. But in Europe, in Asia, in in, you know, places like Hong Kong UAE where, you know, stable coins are being regulated.

The the mainstream players who are coming in want to work with an infrastructure that has the trust transparency liquidity, uh, and compliance that a firm like Circle has. And so I think um, you know, we we've long held that that kind of infrastructure approach as this becomes a mainstream phenomenon. Not just because of of of Regulation but because of the technology advantages that it would Advantage Circle and I think, you know, as you look at our share gains

Uh, year-over-year, and then the absolute growth in recent periods. I think it reflects that.

Okay. Thank you very much, congratulations.

Thank you.

Your next question comes from the line of Joseph vasi with canaccord genuity. Please go ahead.

Yes, no problem. Um, I a couple things I think, the first and, and I, I mentioned this briefly in in my comments as well, which is, you know, Arc network is being designed, um, and built in collaboration with, you know, a lot of major institutions. And you'll note, if you go and look at the actual Arc announcement, the range of financial infrastructure companies Global Banks uh you know, firms in capital markets, uh asset issuers, asset managers. But from all around the world from from Asia, to the Middle East to Europe, to the United States, to Latin America. And so 1 of the fundamental principles is we want a network that is distributed that has operators from around the world uh from different geographies and geoeconomics systems. And we want to create ways for those participants including the developers that build applications on Ark and the end users that are driving and and and and uh and grow

Growing the usage of Arc. We want to create stakeholder incentives and we want to create governance methods for the evolution of the network. Now, this is I think relatively common in the blockchain uh, Network space. But I think at this moment in time when we're trying to bring together, uh, these mainstream companies and leading firms in the digital asset ecosystem as well, we really see the potential benefit of a native token for our

Park that can provide utility for users of the network that can align incentives around the growth of the network, and that provides a concrete way for stakeholders to participate. In governance, around choices, in terms of the technology and its upgrades, uh, choices, uh, in terms of the expansion of The Operators, on the network as well. And so, we're, you know, we're actively evaluating a token for Arc and we'll share more about that as, uh, as that comes together. But I think, um, you know, based on the ark public test net launch and the engagement we're seeing from developers already. We're we're really excited about this. We think it can be a critical infrastructure for Circle but also a critical infrastructure for the entire Global ecosystem that are trying to build mainstream scale applications on these networks and operating systems.

That's great. Um really exciting and then uh just what does the intersection I know it's early days the intersection of CPN and Arc look like um at this point or in the near future, thanks very much.

Yeah. So, a couple of things. I think the first is that we have, um, you know, we have with Arc now and Testnet. We are activating the Ark as an infrastructure in Testnet across all of Circle's products and services. During Testnet, we'll continue to make sure that everything is available. I think we just announced in the last day.

Uh, our our tokenized money market. Fund product. Usy went live on our test net. And so we want to make sure that that full Suite is there and and, and, and then secondly directly to your question. We think that our Network can be a very important infrastructure for CPN, providing a best-in-class infrastructure, with low costs with settlement finality and ultimately with great FX infrastructure as well. You'll note in the arc test net announcement, there were a large number of, uh, non-dollar currency, issuers launching on our test, net and a number of those are already up and running on the test. Net. And so whether These Are Yin or, or real or peso, or Australian, currencies, other currencies, we want to grow the number of local currencies and that's important. Because if we can establish, uh, seamless real-time atomically, swappable, uh, currency exchange, and embed that as a primitive, uh, that

Can be used by by members on CPN, that could be a very, you know, very powerful capability. And so, Arc, as a as a platform for stablecoin finance, uh, and Arc as a, a sort of Enterprise grade and and Regulatory ready, infrastructure for fees aligns, very well with the ultimate goals for CPN. So, we at the application, you know, in other words, the application layer CPN is building on our stablecoin and digital asset, uh, network with with usdc and eerc and US YC.

And they're all able to build on and take advantage of our operating system uh, with Arc.

You. Our next question comes from the line of Devin. Ryan with citizens, please go ahead.

Um, obviously great to see the momentum in in the pipeline there up pretty materially from the last update. Um, just looking at a sense of kind of the catalysts uh to convert that uh pipeline kind of on on the timeline. Um, if you can give us anything there, you know what, what may close over the next quarter or 2, versus what is kind of more initial exploratory phase and then anything on partnership economics. Then as you do scale, the pipeline. Um, do you have the capacity or or should we expect to see some more cost? Come in? Thanks.

I'm I'll take the first part of that and and have Jeremy foxen. Take the second part of it, just in terms of the catalysts, I think. Um, you know, the building these kind of member-based, uh, payment networks, uh, is, you know, obviously, always the classic chicken and egg, right? You want to make sure that you've got, uh, you've got, you know, flows on on both sides. And so, a lot of our Focus as we have, kind of gotten, this started is get those quality flows from Originators in major markets to, uh, to destinations around the world. And we're starting to see that. And I think that's showing up in in some of the numbers uh, that that we've also shared. I think, uh, per my earlier comments, um, you know, more and more firms who are involved in money movement who are involved in cross-border money movement, whether they be Banks or cross-border payments firms or even uh you know large Enterprises that just deal with the complexity of of how they

Collect and remit and move money for whether it's a Creator or a A supplier. Um all of those uh want to take advantage of the speed.

And capital efficiency and cost efficiency of uh, you know, stable coin infrastructure. And so, you know, we're that's where we're seeing the Catalyst. We're seeing the Catalyst from established firms that are seeing that. If they can internalize how they you know, move money. It actually frees up, Capital reduces the amount of collateral that they have to have creates more Capital efficiency and it can deliver a faster better product user experience as well. So those are the kind of business motivators that people have. And I think, obviously, for us, we're, we're very focused on making sure that we've got high quality participants across the network. So that, um, you know, by, you know, trying to to metcast law. Every new note on the network. Exponentially increases the value of the network, we want. We want these fee to are becoming members to, you know, immediately feel the benefits and the uplift that they get, uh, in in bidirectionally as well, in in using uh, in using this network.

Work. So those are those are catalysts from a from a you know, what are the business drivers for people who are coming on and the the things that, you know, the kinds of things that we're focused on um as we uh, as we evaluate, uh, you know, onboarding, uh, onboarding new members, uh, in terms of the kind of outlook for growth on that and or partnership models and Investments. I'll, I'll turn that over to Jeremy. Fox game. Yeah. Thanks, Jeremy. And hi. And, and you first, just addressing the costs piece of your question, right?

Obviously as the network grows and accelerates its growth so too. And the costs inherent, for example, in onboarding, those fee through the risk and compliance reviews and ongoing monitoring and things like that. So um, yeah. Yes, there will be more costs associated with that, it's kind of within our overall cost envelope. And as a technology company, obviously, we're building this in a very scalable infrastructure driven way with sort of AI Technologies built in wherever possible to ensure that as we scale and grow, we're not doing so by adding people we're doing. So in a very cost-effective cost-efficient manner, which is is very congruent to our sort of um, overall strong operating leverage inherent in every part of our model.

Excellent. Thank you very much. And then as a follow-up um obviously as you're having more conversations with a potential partners and customers um and and those are scaling, pretty materially here. Are you learning anything about um, kind of on the demand side? Anything that could influence kind of the product roadmap? Uh, from here? And then, you know, kind of tied to that. There's been a lot of m&a headlines in the space right now. So just if you can touch on kind of m&a conversations or interest uh at the moment or even kind of what something you thanks.

Key Focus for us, basically ensuring that our liquidity network is as strong as possible. You know, we we uh we we mint and redeem at scale through major Financial Market centers around the world. We're increasing the number of significant banks that are that are kind of plugged into our infrastructure in these major markets. And sort of, if you think about that, that sort of like the width and the efficiency of the pipes, how how efficient and cost efficient, is it to be able to move Capital through through those pipes. And so that's been a, a big differentiator for us. And I think we're now able to build on top of that. These other abstractions, whether they be FX abstractions, uh, you know, uh, settlement credit, abstractions, the CPN orchestration, uh, coordination, uh, capabilities. Uh, and then obviously, for many of the firms who are this is new to them. This is, uh, you know, there's the digital asset native ecosystem who are leaning in. And then there's all these firms that are new to this,

This is really where Technologies like Ark come in and a big motivator for us with Arc is we've looked for years at what does it take for a traditional fee or traditional Enterprise to build an application, deploy it to use these networks and to do that in a simple safe and well assured process as possible. So with Arc, for example, deterministic settlement finality in in, you know, sub-second transaction costs of around a penny.

Uh, the fees paid on the network are actually in usdc and other stable coins over time. And so um, you know, confidentiality features, these are critical features that people need to make this, you know, work for them. Uh and this is you know, really the classic Evolution from an earlier doctor uh set of Technology infrastructure, an early adopter mentality which has largely been focused on speculating and a mainstream scaling phase where the infrastructure needs to map to the mainstream needs. And um, and and I think those are the things that we're doing up and down the entire product stack, not just in CPN, but the entire product stack uh that we're building for all of these mainstream institutions around the world who are are are looking to to build on this infrastructure.

And then, just taking the m&a out of your questions, when we've talked about m&a and our internal m&a strategy, right? We see m&a as as

And its use as accelerative to our core offerings. So we have offerings in the blockchain space in the digital asset space. And then in the application space on top of all of those with the circle payments Network, we've done 3 deals closed, 3 deals so far this year, and we would expect to continue to do m&a to accelerate within each of those, uh, within each of those spaces, we do not anticipate using m&a to diversify for diversification site.

1 1, last comment, there is, you know, we we've been building infrastructure in this whole space for, for a very long time. And so, and and there are other firms who want to be in the space, but need to catch up. Um, and so na naturally. You're you're sort of seeing people who are trying to find, uh, you know, teams and technology and other things out there. Um, you know, you know, we've we've built, uh, everything that we do, uh, historically, uh, more or less organically. We as Jeremy noted, we've acquired IP and teams and others. And we'll continue to look at opportunities as noted. But, um, we feel very good about our kind of innovation curve itself and our direct, uh, IP generation. We actually recently noted that we had 25 patents, uh, generated, uh, from uh, the the, uh, novel, uh, engineering and research and development of circle.

Really appreciate it.

You are our next question comes from.

John Torero with nem, please go ahead.

Great. Thanks for taking my question and congrats on the results here. Um I I guess I have wanted to follow up. Um, first on the on platform performance, I think we've been continuously pretty pleasantly surprised with the uh the uscc on Circle platform here up to 10.2 billion. Um I you know I'm just trying to frame this up. I would think most of this is for payments cross border money movement versus kind of crypto. Native, any kind of um maybe percentages or just framing that up and give us a little

A little bit more color. Is that the right way to think about it that we're you know, that moves more towards some of the payment verticals versus some of the crypto NATA stuff and then I have a follow up on Ark

Sure. So John, um, we don't break out the on platform by say use case uh uh directly. Um but what what I can say is

Build on top of our technology stack, you know, ideally end to end on our technology stack, taking advantage of, you know, our wallets, our, our our Circle mint, our core liquidity and increasingly these other developer services and and uh and infrastructure like CPN. So we've very much focused on firms that want to build on our infrastructure and we focus on um, building Partnerships with firms that are going to be growth oriented meaning. Uh, we we want to, you know, we want to have we want to do deals with and builds strong economic relationships with firms who are, you know, have a have a credible path to driving growth. Uh, uh, and so those have been the focuses. And I think when we, when we look at, um, the Partnerships that have helped us grow on platform, they all fit that criteria. Um, uh, overall, um, and I think in some cases, just to give you a little bit more color uh, in some cases, these are part

Partnerships with firms that have tens or hundreds of millions of users.

And those users are in often times in in what I'll kind of call like Financial super apps, where they offer uh, you know, wallets, they offer payments. They offer trading investing, uh, and other things. And so we don't, uh, we don't see through into the all of the behavior of their users and how much of it is uh, uh for, you know, peer-to-peer transfers versus uh,

Versus, you know, in Investments and, and other things as well. So, but the, the nature of this is we're really going after Partnerships with with platforms that have good distribution and our growth oriented, uh, in in what they can do with us.

That's very helpful and then my follow-up on our, um, as you mentioned the fees are paid in in usdc and other stable coins and then also just those transaction fees are so diminished. And I can't imagine a token would be would be for, for gas fees or anything about like, um,

You kind of framed it up as maybe like a governance token. Is that the right way to think about it? And I know it's early but just maybe some more of the, the potential, like economic approval or utility outside of, um, yeah. I guess, just, what would the other potential utility be if it's not for the gas side?

Yeah, so, um, a couple things. I I, I think, as I said, earlier, we're looking broadly at

Um, uh, utility economic incentives. Stakeholder participation and governance across the full ecosystem that will engage with Arc. And we are exploring, uh, a token for Ark Network that aligns with trying to accomplish all those things, but there's not a lot more I can say right now, uh, certainly as, uh, we continue this exploration, uh, we'll we'll be able to share uh, uh, considerably more, uh, assuming that that continues to go. Well,

Understood uh appreciate thanks for taking my questions and congrats again.

Thank you.

you're next question comes from the line of Ken schakowsky with a

research. Please go ahead.

Hey, good morning. Uh, thanks for taking the questions. I wanted to ask about the, uh, the other Revenue. I think subscription Revenue stepped up nicely quarter of a quarter. So how much of that is driven by adding, uh, the 5 new chains that you talked about versus some of the other, uh, recurring Revenue sources

And then maybe on the transaction Revenue within other Revenue. I think that ticked down slightly quarter of a quarter. Uh, despite showing really strong growth across the various metrics, so maybe a little more detail on why the decline, uh, coder recorder. Thanks so much.

So thank you. Excuse me, thank you. For the question that there's a, there's a lot that goes on in in, in in in this. So let me try and unpick some of the pieces.

Um yes so sort of as you said strong growth in subscription and services Revenue primarily that is revenues from our blockchain Network Partnerships. As I think we said before that Revenue stream has 2 components. There are upfront, um revenues from the various Integrations that we do and then there are ongoing revenues um, for for, for maintaining those. Now, the pace and progress of the, um, upfront can depend upon a whole number of different factors and so we've historically and we'll do so again, describe that business.

Business is Lumpy and so we had a a very strong quarter and we had a long pipeline of these and we've been working very, very hard to execute the execute upon Moses. So The Upfront fees um, is the largest part of that bucket but we're seeing strong growth in the underlying recurring revenues within subscription Services which we're very happy about.

.7 million this quarter and then you comment on the underlying growth of so many other things, there's a wide variety of of elements within transaction revenues. And yes, we are seeing strong underlying growth. In many of them, the decline quarter on quarter is best thought of as a spike in the prior quarter.

A spike in Redemption revenues associated with our, I mean, us YC tokenized money market, fund product after we have made that acquisition, we repositioned that product to be used, um, as collateral within the digital asset markets. And through that repositioning, we saw a very large amount of redemptions leading to a spike in Redemption fees in the second quarter which masks the underlying growth Trends in the other products and services within that, notably us YC itself as a return to growth. It, it it, it has grown at 200% from the end of last quarter to today, and now, stands as the second largest tokenized money, fund product in the world.

Great, that that's helpful. Jeremy. And then for my follow-up, I wanted to ask about the implied 4q guide just because we're getting a few questions on it for rldc. I think there's some assumptions we all have to make there, but I think to reach the full year guy that implies quite a bit of of sequential step down in margins. Maybe you could talk about what's driving the step down. We would have thought that the

The performance on circle, on platform usdc and then some of the other Revenue at a high margin that rldc margins would actually improve.

Over time, but maybe there's some Dynamics in the market related to rewards and distribution costs. Um so any any thoughts there? Any help there would be would be very helpful. Thank you.

Thank you. And and that's a great question. And and, and again, I'm going to say there's a lot of different pieces moving around in the underlying there, which could can make it quite difficult to unpick. Um, you know, we're we're very pleased to have seen strong sequential rldc revenues against a, a backdrop over the last few years of that declining. We've long said that networks have Network effects and we see this both in sort of growth of of platform usdc and in certain of our economic agreements that can be some, um, you know, some lumpiness within those, um, which kind of gets to the the point on the guidance on our philosophy to guidance overall, we've consistently said that we want to be as clear and transparent with you as we have a line of sight into. So we take a sort of modestly conservative posture. We don't bake in everything. We hope is going to happen, whatever thing we're working on and we're working on an awful lot of things. We bake into sort of our line of sight on what we feel. Confident that is going to be delivered when we

Would always look to uh, meet or outperform.

Okay. Thanks. Jeremy

Your next question comes from the land line of Dan, dolev with meizuo please. Go ahead.

Hey guys. Uh thanks for taking my question. So yeah. Overall you know, really strong 3Q, kind of touching on that question from before. I mean,

You know, if the bookcase is the 10 is growing, and that could have said, you know, rate the clients it, you do. See, I mean, you're talking about guiding down Q4.

Uh other income and expenses are rising. I don't think we've heard like a really good explanation but maybe maybe my

bigger question is

You know what would be the push back?

To the Skeptics in the industry. Who are saying look this is somewhat of a commoditized thing. I think, even the networks are saying there's going to be a lot of stable coins like what would make

Usdc win in this market long term. So maybe like a shorter term question on this Q4 guide and then longer term more conceptual question would be great. Thank you.

Works are like other internet platform, utilities, meaning they have Network effects and those Network effects come from the number of products, and services, and Integrations to the network. And and so, you know, if I'm building a product and I want to support, you know, stablecoin uh, uh, you know, stablecoin settlements and stablecoin payments. You're at a disadvantage if you don't support usdc because it has so much interoperability around the world and we see that all the time. We see, you know, major B2B firms adding usdc as the payment option without a deal with circle without any relationship with circle, they're doing it because it's got the most reach and interoperability. So there's sort of the network utility that also ties to what I would describe as developer, flywheels, which is developers want to build and integrate to things that are going to help them themselves provide utility directly to their users. And so the reach of the network and the utility of the network, compound each other, and then the other piece, which is, I think also,

um, not as well understood is that

These digital currencies.

Live and Breathe by the liquidity, that exists around them. And so we have focused years on building, you know, the best, uh, you know, most widely integrated liquidity Network for usdc primary liquidity, in major banking systems around the world, uh, and as well as secondary Market liquidity so that it exists on brokerages exchanges.

Payment apps wallets through banks uh and and others around the world that primary and secondary liquidity is also something with network effects. If you want to do something, and know that your counterparty is going to be able to be liquid in it, and, and utilize it, that liquidity is really key. So those are big, those are very big. I think a very powerful Network effects. And I think, um, you know, the, the last piece of this is that there are there are also um important kind of regulatory and infrastructure modes that exists which is that it's a huge undertaking to ensure that you are. Well integrated and supervised by Central Banking regimes around the world and that's something that we've done the hard work on uh with over 55 licenses activated in more markets, bringing more markets online. And so the infrastructure from that, the risk infrastructure from that. And then all these other network effects are, are really important. And I think it, it explains the fact that we have continued to grow at the pace. We have that

the amount of growth we've seen in, in the onchain markets in, uh, total transaction volumes, and what visa characterizes as, as, uh, quote, real payment volumes, we've grown, and we've, and we've grown our share and despite there being more and more players. And and so I think, you know, I think as we look out over the next uh, you know, 1 2 3 4 quarters, you're you're going to see a lot of noise from a lot of people who think oh I need to do a stable coin and I think you're going to be able to measure those

Every single day and I would encourage people to measure the actual trading liquidity that exists in these other tokens. The actual number of wallets that hold these other tokens and the distribution. That's there. And I think I think we're going to continue to see what we've seen. This is a winner, take most Market structure. It's not a winner. Take all Market structure, but it's a winner take most Market structure and, uh, and I and I think, um, you know, the the Investments, uh, that you're seeing, and I'm kind of bleeding into maybe jfg is, uh, other part of your question. Uh, Dan, you know, we are leaning into this. We're seeing growth in major platform developments that we think are critical to winning the internet platform game in this space, and we're seeing, um, a lot of commercial Tailwind all around the world. You know, in every region, a commercial Tailwind, um, because of the technology progressed and Regulatory Clarity, and we want to make sure that we are, we are stepping into the into that opportunity, uh, so that we can continue to

To be a an outsized uh you know winner in this kind of uh upgrade of the financial system to the internet.

Yeah, thank you, Jeremy. Thanks. Jeremy you. You hit on all all the major points and that just 1 small follow-up on the piece about guidance. Um, you know, we are at the beginning of what can best really only be described as a mega Trend, right? The growth of the building of the internet Financial system, bringing internet capabilities, and architectures into the world of money. And as you notice

the forest for the trees, if 1 was to overly focus on them,

Thank you. Uh really. Really appreciate the perspective. I think it was very useful for investors too. So thanks Jeremy and Jeremy.

Thank you, Dan. Thank you.

Your next question comes from the line of Andrew Geoffrey with William. Blair please go ahead.

Hey, good morning guys. This is cherry on for Andrew, um, building up some prior questions. It sounds like maybe you're somewhat agnostic to specifically case around your FCC and focus more on distribution. But if you have to pick, I guess. What's the most eminent use? Case Beyond crypto training in your view and what sort of the near-term visibility you have around uscc for non-crypto activity taking off? Thanks.

Absolutely, uh, great question. So we are definitely not agnostic to the use cases of usdc. However, what we do often say is, you know, uh, stablecoin money, uh, is increasingly a general purpose, General architecture form of money. That is being used across a very wide range. Of use cases, everything from small agent to agent payments to large, Capital markets transactions, between major electronic markets, firms, uh, to to everything in between. You know, we're we're obviously we're seeing major, uh, consumer retail acceptance platforms like stripe and Shopify. Make it an out of the box feature for, for payment acceptance, but very specifically to get to the heart of your question Andrew.

I think, um, uh, we are seeing growth in cross-border and international payments with stable coins that has been a driver for quite some time. And it continues to drive growth, uh, that that led to us building out an entire new pillar of our business with CPN, uh, where we're seeing mainstream flows, wanting to use this as a superior money movement system. And so that is, you know, very much a, a driver of activity and growth and Partnerships. When I look at the Partnerships that we're forming around the world, there are many in that space. And we're even seeing some of the biggest, uh, systemically important Banks leaning into that, to actually improve upon the way in which they do their own International money movement. Uh, we're seeing large Enterprises who are, uh, looking at, um, internal treasury management and how they can move money across geographies and, and, and deal with Collections and dispersement across Global markets as a growth driver. Um, and then, you know, we've talked in the past as well about

sort of digital dollar as a store of value. So we continue to see demand for both firms and households, who want to, who want to hold usdc. Uh, and I think that if you look back at the genius act and and really 1 of the goals that secretary besan and other kind of uh, I think promoters of of that breakthrough uh in in in federal law. Um, it really is about how do we kind of continue to export uh the dollar in in these powerful ways?

Uh, so we're we're we're certainly seeing those and then I think we're also starting to see and this is I think something to kind of watch this space closely is traditional financial markets.

Embracing stable coins so traditional financial markets like Clearing Houses, uh derivatives exchanges that want to be able to use stable coins as collateral for relative margin and for settlement. Um as an improvement over the way, that works versus the traditional banking system. So we're seeing that we're seeing big pushes around that we're seeing regulatory pushes around that. And you've seen us, you know, announced Partnerships with the likes of, uh, inter, you know, I Intercontinental Exchange Joy, Sports Group and others. Uh, and that's something that, uh, we, we are pressing on and related to that is essentially, the number of traditional financial institutions that are launching uh uh uh smart contracts and digital tokens. IE token, tokenized forms of investment products. Uh, that already exists and virtually every 1 of those products uses usdc as its primary cash leg and, and settlement leg. And so

You know, you you have uh you know, firms like a zero hash uh who who works with uh works with us uh quite a bit and they face off against a lot of these tokenized issuers for example and and driving the use of usdc there. So it is diverse.

Ology. And there's a knock-on effect with Regulators around the world who are also looking to conform and ensure that you know well regulated issue products like usdc can work in their local markets as well which is driving institutional access and demand in those uh in those global geographies. Uh also

your next question comes from the line of James yarrow with Goldman Sachs, please go ahead. Uh, thanks, uh, for taking the question and good morning. Um, I just wanted to follow up on the prior question, I'd love to just get a sense perhaps quantitatively. If there's, uh, any ability to to contextualize how much uh usdc is being uh used in those use cases outside of crypto trading, Defi and developing Market access to Dollars. Specifically the 2 use cases which you just talked about. Are are payments and capital markets so are we seeing you know, uh is is there any ability to sort of size? How much is is being used there and perhaps you could compare it versus the IPO or is this all on the comp?

So the there is, there's certainly growth happening in these cross border, um, uh, uh, use cases. And in fact, I think there's, you know, there's there's some good third-party reporting on this. Um, there's a third-party analyst firm Artemis, which is recently published. I think some of the best data on growth in um in business, to business Payments, International business, to business payments, uh and the and the growth uh, through these periods. I think it.

I don't know what the ending, period. The ending period is pretty recent. Um, is very strong. I think it's reflective of what we're seeing in the, in the Partnerships that we're forming in the cross border, uh, you know, related payment space. Um, we don't break out across our our entire, the entirety of our transactions that although, uh, almost by definition CPN flows. Uh, are, are, are that, uh, uh, because of the construct of the product but the the uses of usdc, uh, in international settlements, go go. Well, well, beyond what is happening just inside of CPN. Um, so, uh, we don't break it out, um, but there are I think very good, third parties who are, uh, looking at the entire ecosystem, not just circle, uh, to, uh, to size that growth and activation.

Okay, thanks a lot. Um, I'd just like to touch on the potential that stable coins, could become interest bearing in congress's Market structure Bill. How should we think about the impacts on your business if interests were permitted?

So I I I think the the the key issue here is specifically not that stable coins would become interest bearing. I I I don't think there's anyone who's looking at revising the genius Act and the, uh, prohibition on stablecoin issuers, being able to pay interest. I think, what's that? What's that, uh, what's in in discussion? I should say in the market structure legislation is whether or not uh, Distributors of

Stable coins exchanges brokerages, uh, other other, you know, wallet products, um, have the ability to use rewards as an incentive for people to, to use stable coins on their platforms. And um, that is a permitted uh, under the genius act. And I think there's a, there's a, a a, you know, a real push from other parts of the industry. Not the not, not the, the digital asset uh side of the industry to amend, not the genius act but to provide Provisions in the market structure bill which would allow these stable coin, Distributors, continue this practice of offering rewards. Um, you know, I think we think that the language in the genius Act is, is very good. We think it creates a, a, a balanced uh, approach here. Uh, and it keeps importantly, it keeps, you know, stable coins, uh, considered as cash and cash equivalent instruments, which is vital, uh, from a financial markets perspective.

From credential supervisory perspective, uh, as well. But I think, um, we also believe that, you know, there should be business model innovation in in uh, in these kind of um, distribution platforms for for how they engage with their customers. And so, I think we're also supportive of of The industry's View on that as well.

That's very helpful. Thanks a lot.

Seeing the power of the network allowing you to negotiate, you know better economics for you and these Arrangements than maybe what you had seen um in in the earlier arrangements.

Yeah, it's a very good question. And, and it relates to, to something I shared earlier, which is that, um, you know, we have a, a very powerful Global utility that in in some ways. People can't afford, not to support an integrate with. If you're building a product, that wants to be interoperable in this world, you need to support usdc. And if you need it, if you want a product that can can easily move value in and out. Uh, the liquidity of usdc is essential, so we do have, I think as noted, very strong Network effects, and when we think about Partnerships,

As I said earlier, we're very focused on, we will invest in so to speak uh, growth incentives with Partners who can grow distribution? Uh, that's where we're focused. And so um, the fact that someone adds usdc support to their own product or service is not sufficient to get any economics.

Uh we need to see a real path. A win-win path, where partners are going to lean in, they're going to prefer our our platform and network, they're going to advance it, they're going to Market it, they're going to drive measurable growth and only when we see that are we going to really, you know, step in and and try and get uh e e economic incentives.

In place. And, and that's important. We want this to be win-win Partnerships that drive value and growth for both of us. And, uh, and you know, we we know today that, you know, our Network and, and, and capabilities is essential for for, for most products, uh, that are out there. And, um, uh, but but at the same time, yes we are. We are, we are trying to, you know, construct, win-win Partnerships, uh, with firms. Uh, but you know, a very large number of the major brands that you see supporting usdc. There's not a direct economic incentive at all. These are just people who are choosing us because we are the most trusted transparent, compliant liquid globally available, uh, uh, in the world.

Ladies and gentlemen, that does conclude our question and answer session. I will now turn the conference back over to John Andrews for closing comments.

Great. Um, thank you everyone for taking the time to listen to us this morning. Obviously, the IR team here at Circle standing by to, uh, engage with you, in any follow-ups. And, uh, we wish you all a good day.

Thank you.

This concludes today's conference call. Thank you for your participation and you may now disconnect