Circle-Coinbase partnership; Bernstein answers the questions

Bernstein views the Coinbase-Circle partnership concerning the USDC stablecoin as foundational, highlighting Coinbase's critical role in USDC's distribution and liquidity. This collaboration has significantly boosted Coinbase's stable, non-trading revenue, which accounted for 42% of its total revenue in 2024, providing a more reliable income stream. While the current revenue-sharing agreement is due for renewal in 2026, Bernstein anticipates the pragmatic partnership will continue, supporting USDC's dominance and broader adoption beyond crypto, even as Coinbase's share of USDC revenue may marginally decline by 2027 due to diversified growth across platforms like Binance.

Analysis

According to a Bernstein analysis, the partnership between Coinbase (COIN) and Circle on the USDC stablecoin is foundational and has materially shifted Coinbase's revenue composition towards greater stability. Stablecoin-related income was a primary driver of a 51% jump in Coinbase's stablecoin revenue in the first quarter and has helped expand its non-trading revenue from $181 million in 2020 to a projected $2.8 billion in 2024, now accounting for 42% of total revenue. This creates a more predictable, annuity-like income stream, mitigating reliance on volatile trading activity. While the revenue-sharing agreement is due for renewal by 2026, Bernstein anticipates a pragmatic continuation of the partnership, viewing it as essential for growing USDC's market dominance. Key growth catalysts include Coinbase's 67% U.S. market share, the impending launch of its U.S. perpetual futures product using USDC as collateral, and a favorable regulatory outlook from the GENIUS and CLARITY Acts. Bernstein does, however, project a marginal decline in Coinbase's share of total USDC revenue to around 50% by 2027 as the stablecoin gains traction on other platforms like Binance and its use cases expand beyond centralized exchanges, a trend viewed as a sign of USDC's overall network strength rather than a weakness in the partnership.

Key Decisions for Investors

• Investors should re-evaluate Coinbase's valuation to reflect the growing contribution from stable, non-trading revenue, which now constitutes 42% of the total and reduces the company's dependency on volatile crypto market cycles.
• Monitor developments related to the 2026 revenue-sharing agreement renewal with Circle, as any significant change to the current pragmatic terms could materially impact future earnings from this high-growth segment.
• Watch for near-term catalysts that could validate the growth thesis, including the U.S. launch of perpetual futures on July 21 and legislative progress on the GENIUS and CLARITY Acts, which are positioned to bolster onshore USDC adoption.
• Factor into long-term models the potential for a marginal decline in Coinbase's share of total USDC revenue as the stablecoin's adoption on other platforms is a key indicator of its broader market success and network effect.