How ETF issuers make money: A look at Circle's business model from the perspective of clients, channels, and end users

Core Viewpoint

Introduction

To understand Circle, we must first answer a seemingly simple yet crucial question that determines its business model:

Who exactly are Circle's customers? Are they the institutions that directly use Circle Mint, the exchanges, wallets, and payment platforms responsible for distributing USDC, or the individuals and businesses that ultimately hold and use USDC?

From a contractual perspective, Circle primarily serves banks, exchanges, payment service providers, wallet companies, enterprises, and developers. Ordinary users typically obtain USDC through Coinbase, Binance, wallets, or fintech platforms, lacking a direct account relationship with Circle.

From an economic substance perspective, end users and institutions hold USDC, forming a reserve asset scale; reserves generate interest income; Circle then distributes part of the economic benefits to channels like Coinbase. This creates a unique B2B2C structure:

Circle is responsible for issuance, reserves, compliance, and redemption.
Channels are responsible for distribution and customer entry.
End users are responsible for creating demand for USDC and maintaining asset balances.

This structure is highly similar to that of ETF issuers.

ETF issuers also do not directly face the vast majority of end investors. Institutions like BlackRock and State Street are primarily responsible for product design, fund management, index licensing, regulatory compliance, and operations; authorized participants complete the creation and redemption of shares in the primary market; market makers provide liquidity; brokers, wealth management platforms, and investment advisors manage relationships with end investors.

ETF holders determine final demand, channels control distribution entry, and issuers rely on AUM and management fees for monetization.

Circle and USDC also exhibit a similar relationship:

Circle Mint institutional clients → Correspond to ETF authorized participants.
USDC minting and redemption → Correspond to ETF share creation and redemption.
Exchanges, wallets, and payment platforms → Correspond to brokers and wealth management channels.
USDC circulation → Corresponds to ETF's AUM.
Reserve income → Corresponds to asset scale-driven management income.

However, there is a key difference between Circle and traditional ETF issuers.

ETF issuers typically charge management fees from AUM at a defined rate, while channels primarily earn income through trading, custody, advisory services, and distribution. Currently, most of Circle's income comes from USDC reserve earnings, while needing to share a significant portion of economic benefits with some large channels.

Therefore, for CRCL investors, what truly needs to be studied is not just whether USDC can continue to grow, but also three deeper questions:

Who holds the end customer relationships?
How much of the incremental economic benefits from USDC growth does Circle retain?
As network effects strengthen, can Circle reduce its dependence on channels and marginal distribution costs?

This article will start from the business model of ETF issuers, dissect the relationships between primary market creation and redemption, AUM fees, authorized participants, market makers, broker channels, and end investors, and compare them item by item with Circle and USDC.

Understanding how ETF issuers organize customers, channels, and end users helps to more accurately assess what stage Circle is currently in and whether it can gradually upgrade from a stablecoin issuer reliant on reserve income to an internet financial infrastructure company with stronger network monetization rights and platform revenue.

Core Conclusion

The essence of ETF issuers is to package an investment exposure into a standardized, tradable, and redeemable financial product, and then organize index companies, custodial banks, authorized participants, market makers, exchanges, brokers, and investment advisors to complete the distribution.

Their core revenue formula is very simple:

ETF issuer revenue ≈ Average AUM × Overall management fee rate + Additional income from securities lending, etc.

Circle's current core revenue formula is:

Circle total revenue ≈ Average USDC circulation × Reserve return rate + Other service income

Both depend on "asset scale," but the sources of monetization rights differ fundamentally:

ETF management fees are written into fund contracts and paid continuously from fund assets.
Circle currently primarily earns income by retaining USDC reserve earnings.
ETF holders have proportional rights to fund assets and their income.
USDC holders mainly obtain a $1 redemption right, with reserve earnings entering Circle and its channel partners' economic distribution system.

Therefore:

Circle currently resembles an "ETF issuance platform with payment network potential, monetizing through reserve interest spreads."

Whether Circle can achieve valuations similar to Visa, Mastercard, or AWS in the future depends on its ability to establish independently chargeable payment, foreign exchange, compliance, treasury, and developer services beyond USDC issuance.

1. What exactly are ETF issuers selling?

Strictly speaking, institutions like BlackRock and State Street do not place all assets of a typical ETF directly onto their balance sheets. ETFs are usually independent funds or trusts, where investors hold proportional rights to the fund's investment portfolio and income, and investment advisors charge management fees based on the fund's average net assets. Retail investors typically buy and sell ETFs only in the secondary market, with only authorized participants able to directly create and redeem large shares with the fund. (Investor.gov)

The value provided by ETF issuers to investors includes five layers:

Investment exposure packaging: Investors can gain exposure to the S&P 500, Nasdaq, U.S. Treasuries, gold, sectors, factors, or active strategies with a single security.
Intraday liquidity: ETFs can be traded throughout the day like stocks, allowing investors to avoid waiting for the fund's net asset value after daily close.
Primary market creation and redemption mechanism: Authorized participants can create or redeem ETF shares using a basket of securities or cash.
Price anchoring mechanism: When ETF prices deviate from net asset value, authorized participants can arbitrage, bringing market prices back closer to NAV.
Distribution and operational infrastructure: ETF issuers organize index licensing, investment management, custody, administrative management, regulatory disclosures, exchange listings, market making, and broker distribution.

The SEC points out that ETFs typically have lower operating expenses, lower trading friction, and higher tax efficiency compared to similar mutual funds, and the physical creation and redemption mechanism in the primary market can also reduce capital gains generated by the fund selling securities to meet redemptions. (Investor.gov)

Thus, ETF issuers are not selling a basket of stocks per se; their product value comes from:

Standardized exposure + Liquidity organization + Legal structure + Distribution network + Operational services

2. How do ETF issuers specifically charge fees?

1. Management fees and overall rates

This is the primary and most stable source of income for ETF issuers.

The calculation method is usually:

Annual management fee = Fund average daily net assets × Annual management fee rate

Management fees are typically accrued daily, paid monthly by the fund, and deducted directly from fund assets, gradually reflecting in the ETF's net value. Investors do not receive separate bills. For example, for IVV, BlackRock Fund Advisors charges an annual management fee of 0.03% based on average daily net assets. (SEC)

As of July 23, 2026, IVV's asset scale is approximately $868.3 billion, with a fee rate of 0.03%. Based on that asset scale, the static calculation is:

$868.3 billion × 0.03% ≈ $260 million in annual management fees.

This is a typical "extremely low fee, extremely large scale" product. (BlackRock)

Active and thematic ETFs typically have higher fees. For example, the iShares U.S. Thematic Rotation Active ETF has a fee rate of 0.57%, with an asset scale of approximately $6.38 billion as of July 23, 2026. The static calculation of annual management fees is about $36 million. (BlackRock)

This reflects the two types of products from ETF issuers:

| Product Type | Typical Strategy | Fee Rate | Business Role | |-------------|-------------------|----|---------------| | Core Broad-based ETF | S&P 500, total market, U.S. Treasuries | Extremely low | Achieve scale, liquidity, and customer entry | | Sector, factor, active ETF | Technology, healthcare, thematic, active allocation | Relatively high | Enhance overall fee rate and profit margin |

Core ETFs often bear the traffic entry and brand anchor, while high-fee products bear more profit monetization.

2. Securities lending income

ETFs hold a large number of stocks and bonds and can lend some securities to short sellers, brokers, or other market participants, charging lending fees.

Securities lending income is typically distributed between the fund and securities lending agents. BlackRock earned $705 million in securities lending income in 2025, with related fees usually shared between BlackRock and the funds or accounts providing the securities. (SEC)

Securities lending serves three purposes:

Adds additional income to the ETF.
Offsets some management fees and tracking errors.
Provides ETF issuers with income beyond management fees.

Different funds have different sharing rules. Some iShares UCITS ETFs disclose that the fund retains 62.5% of securities lending income, while BlackRock receives 37.5% and bears the operational costs of securities lending. (BlackRock)

3. Creation and redemption transaction fees

Authorized participants may pay fixed fees or additional variable fees when creating or redeeming large shares with the ETF.

These fees primarily cover:

Custody and settlement costs.
Delivery costs for a basket of assets.
Transaction costs arising from cash creation and redemption.
Execution costs for overseas markets, bonds, or illiquid assets.

ETF prospectuses often list standard creation fees of several hundred dollars, along with additional fees charged as a percentage of NAV in special cash creation and redemption situations. (SEC)

Such fees typically belong to a cost recovery mechanism and are not a core profit source for ETF issuers.

4. Broker commissions and bid-ask spreads

Ordinary investors may incur:

Broker commissions.
Bid-ask spreads.
Market impact costs.
Discounts or premiums relative to NAV.

These costs are primarily captured by brokers, exchanges, and market makers and typically do not become direct income for ETF issuers. The SEC also clearly distinguishes between annual operating expenses of ETFs and broker commissions, bid-ask spreads incurred by investors during trading. (Investor.gov)

This point is crucial for understanding Circle:

ETF issuers do not capture all economic benefits within the ETF ecosystem. Market makers, brokers, exchanges, index companies, custodians, and issuers occupy different fee nodes.

5. Channel distribution and platform fees

ETF issuers may also pay fees to brokers, banks, investment advisors, and other distribution platforms.

BlackRock discloses that it may pay fees from its own funds to financial intermediaries for:

Product listings.
Commission-free or reduced trading fees.
Advisor training and investor education.
Data services.
Development of technology platforms and reporting systems.
Incorporating iShares products into specific investment plans or model portfolios.

These payments are sometimes referred to as revenue-sharing payments. (SEC)

Thus, channel sharing is not unique to Circle. The key difference lies in the intensity and structure of the sharing.

ETF issuers' management fees are tied to fund AUM, while channel payments are distribution costs. Circle's arrangement with Coinbase directly shares a significant portion of USDC reserve earnings according to platform internal and external balance and ecological distribution rules, embedding channel sharing deeper into the current core revenue model. Circle confirmed distribution costs to Coinbase reached $330.6 million in Q1 2026. (SEC)

3. How high is BlackRock's ETF business overall fee rate?

BlackRock disclosed that the average ETF AUM in 2025 was approximately $4.772 trillion, with ETF investment advisory fees, administrative management fees, and securities lending income totaling $8.077 billion. (SEC)

$8.077 billion ÷ $4.772 trillion ≈ 0.169%

That is:

The overall revenue rate of BlackRock's ETF business in 2025 was approximately 16.9 basis points.

This figure is higher than IVV's 3 basis points because BlackRock's product portfolio also includes:

High-fee active ETFs.
Sector and thematic ETFs.
Fixed income ETFs.
Commodity and digital asset ETPs.
Securities lending income.

The ETF business model thus exhibits clear product portfolio characteristics:

Broad-based ETFs are responsible for scale, high-fee ETFs enhance overall monetization rates, and securities lending and technology services contribute additional income.

4. How to build an ETF business model from scratch

Step 1: Design a clear investment exposure

ETF issuers first determine what investors need:

Broad-based indices.
National or regional markets.
Sectors or themes.
Fixed income maturities and credit risks.
Factor strategies.
Active investment strategies.
Commodity or digital asset exposures.

If using external indices, they also need to sign licensing agreements with index companies like S&P Dow Jones, MSCI, FTSE Russell, Bloomberg, etc. State Street's SPY uses the licensed S&P 500 index. (State Street Global Advisors)

Step 2: Establish fund legal and operational structures

Issuers need to organize:

Funds or trusts.
Investment advisors.
Fund boards.
Custodial banks.
Fund administrative managers.
Transfer agents.
Distributors.
Audit, legal, and compliance systems.
Exchange listings.

In 2019, the SEC passed ETF Rule 6c-11, providing a unified regulatory framework for most U.S. open-end ETFs, requiring daily disclosure of holdings, NAV, premiums/discounts, and bid-ask spreads, and regulating ETF basket management and authorized participant agreements. (SEC)

Step 3: Invest seed capital

Before listing, ETFs need to obtain the first basket of assets to form the initial creation unit.

Seed capital may come from:

ETF issuers.
Affiliated institutions.
Initial authorized participants.
External institutional investors.

At this point, the ETF does not yet have sufficient natural demand. The issuer bears the upfront costs of product design, legal, data, personnel, listing, and marketing.

Step 4: Recruit authorized participants and market makers

Authorized participants are responsible for primary market creation and redemption, while market makers provide buy and sell quotes on exchanges. Both roles may be undertaken by the same large brokerage or different institutions.

When the ETF price is above NAV, authorized participants can:

Buy underlying assets.
Submit a basket of assets to the ETF.
Obtain new ETF shares.
Sell the ETF in the secondary market.
Capture the price difference.

When the ETF price is below NAV, the arbitrage direction reverses. The SEC believes this arbitrage mechanism typically brings ETF market prices back closer to NAV. (Investor.gov)

This serves as the ETF's "stability mechanism."

Step 5: Form a liquidity flywheel

ETF liquidity typically includes two layers:

Trading liquidity of existing ETF shares in the secondary market.
Liquidity for creating and redeeming ETF shares through underlying assets in the primary market.

As asset scale, the number of market makers, and trading volume increase:

More AUM → More stable market-making inventory → Narrower bid-ask spreads → Lower investor trading costs → More institutional and model portfolio adoption → Higher AUM

This is the liquidity network effect of ETFs.

Step 6: Enter the broker, advisor, and institutional distribution system

ETFs need to enter:

Broker product shelves.
Wealth management platforms.
Registered investment advisor portfolios.
Pension accounts.
Institutional asset allocations.
Robo-advisor model portfolios.
Investment banking and trading departments.

BlackRock clearly states that its retail clients primarily reach through brokers, banks, insurance companies, trust institutions, and independent financial advisors. Since ETFs trade on exchanges, BlackRock typically cannot fully identify the ultimate ETF investors, so it lists ETFs as a separate customer type. (SEC)

This is very close to Circle:

Circle can see some on-chain addresses and institutional clients but typically does not directly own the end customer relationships within wallets, exchanges, and payment platforms.

Step 7: Expand from a single product to a platform

ETF businesses typically start with a small number of major products and then expand into more asset classes.

State Street launched the first listed ETF in the U.S., SPY, in 1993. The predecessor of iShares launched the first batch of 17 ETFs in 1996, including products from international markets like Mexico, Canada, and Brazil, and introduced the first bond ETFs in 2002. BlackRock acquired Barclays Global Investors and its iShares business in 2009, integrating active management, index investing, ETFs, institutional distribution, and risk management capabilities onto the same platform. (State Street Global Advisors)

The flywheel after platformization is:

More ETF categories → Cover more customer needs → Strengthen broker and advisor relationships → Increase overall AUM → Spread technology and compliance costs → Lower core ETF fee rates → Further expand scale

This explains why large ETF issuers can reduce some core ETF fee rates to 3 basis points while still generating considerable income.

5. Precise mapping of the ETF system to the Circle system

Circle Mint is only open to institutions, with typical clients including exchanges, institutional traders, wallet providers, banks, and consumer application companies; ordinary individuals generally obtain USDC in the secondary market. (Circle Docs)

However, there is an important distinction between authorized participants and Circle Mint clients:

The core role of ETF authorized participants is asset basket creation and redemption arbitrage, while Circle Mint clients have a broader role, potentially undertaking minting, redemption, distribution, custody, payment, and end-user services simultaneously.

6. Core similarities between ETFs and USDC

1. Both have institutional primary markets and public secondary markets

Only authorized participants can directly create and redeem large amounts of ETFs, while ordinary investors trade through exchanges and brokers.

USDC is primarily minted and redeemed directly by Circle Mint institutions, while ordinary users obtain USDC through exchanges, wallets, fintech applications, and DeFi.

2. Both rely on arbitrage to maintain price anchors

ETFs rely on NAV arbitrage to keep market prices close to fund net values.

USDC relies on $1 minting and redemption, market maker arbitrage, exchange liquidity, and reserve credibility to maintain its dollar peg.

3. Scale determines income capacity

ETF income depends on average AUM and fee rates.

Circle's reserve income depends on average USDC circulation and reserve return rates.

Both have high fixed costs and low marginal issuance costs, thus generating significant operational leverage as scale increases.

4. Channels hold end relationships

ETF issuers typically cannot fully identify end investors, with wealth platforms, brokers, and advisors holding end accounts.

Circle also cannot directly control end customer relationships within Coinbase, Binance, wallets, and payment applications.

Thus, both models belong to a typical B2B2C structure.

5. Liquidity itself becomes part of the product

When investors choose ETFs, they observe:

Asset scale.
Bid-ask spreads.
Trading volume.
Depth of authorized participants and market makers.
Price tracking against NAV.

When users choose stablecoins, they also observe:

Circulation.
Exchange depth.
Fiat exchange channels.
Wallet and blockchain coverage.
DeFi collateral acceptance.
Redemption reliability.
Stability during stress periods.

7. Fundamental differences between ETFs and USDC

1. ETF holders own asset income, while USDC holders primarily obtain par redemption rights

ETF shares represent proportional rights to the fund's investment portfolio and its income. Stock appreciation, bond interest, and dividends ultimately belong to ETF investors, with issuers only collecting a small portion of management fees. (Investor.gov)

USDC holders typically only obtain a stable value of $1 and redemption capability. The interest generated from USDC reserves primarily enters Circle's reserve income and is further distributed with channels like Coinbase and Binance. In 2025, 96% of Circle's income came from reserve income, and this proportion remained at 94% in Q1 2026. (SEC)

This explains why Circle's current unit asset monetization rate is far higher than that of ordinary ETF issuers.

2. ETFs rely on market beta, while Circle relies on interest rate beta

ETF AUM can grow through two paths:

Net inflows from investors.
Appreciation of underlying stocks, bonds, or commodities.

Even without net inflows, a bull market will increase ETF AUM and management fees.

USDC is always pegged to $1, and reserve assets do not appreciate significantly over the long term like stock ETFs. Circle's income growth primarily relies on:

Net issuance of USDC.
Reserve interest rates.
Proportion of economic benefits retained by Circle.
Non-interest service income.

Thus:

BlackRock has market asset price beta, while Circle has USDC adoption rate and short-term interest rate beta.

3. ETF management fees have stronger contractual stability

ETF management fees are directly written into fund documents, and while rates may decline due to competition, issuers have clear contractual rights to existing AUM.

Circle's current reserve income depends on:

Market interest rates.
USDC circulation scale.
Distribution of USDC balances across different platforms.
Agreements with partners like Coinbase.
Incentive terms for new channels.
Regulatory oversight of stablecoin income distribution.

Circle itself also states that distribution costs will vary with the scale at which Coinbase, Binance, and other partners hold and distribute USDC. (SEC)

4. ETF authorized participants primarily profit from arbitrage, while Circle channels heavily rely on reserve income distribution

Authorized participants and ETF market makers typically earn through:

Creation and redemption arbitrage.
Bid-ask spreads.
Customer trading volume.
Inventory and hedging management.

They usually do not need to permanently obtain half of the ETF management fees.

Some core channels of Circle directly share USDC reserve economic benefits. Coinbase receives distributions based on platform balances and broader ecological balances, with Circle paying $330.6 million in distribution costs to Coinbase in Q1 2026. (SEC)

This means that the channel economy within the ETF ecosystem is relatively self-sustaining, while Circle's ecosystem still requires issuers to continuously transfer economic benefits to channels.

5. USDC has a broader usage network than ordinary ETFs

ETFs are primarily used for:

Investment.
Trading.
Hedging.
Asset allocation.
Collateral financing.

USDC can also be used for:

Payments.
Cross-border remittances.
Corporate settlements.
DeFi collateral.
Trading margins.
Tokenized securities cash legs.
Smart contracts.
On-chain treasury management.

Thus, the potential network effects of USDC are stronger than those of a single ordinary ETF. However, the degree of homogenization among stablecoins is also higher, and automatic backend conversions and multi-currency routing can reduce end users' perception of a single brand.

8. Comparison of unit economics between Circle and ETF issuers

1. BlackRock ETF business

In 2025:

Average ETF AUM was approximately $4.772 trillion.
ETF management, administrative, and securities lending income was about $8.077 billion.
Overall monetization rate was approximately 16.9 basis points. (SEC)

2. Circle

In Q1 2026:

Average USDC circulation was $75.2 billion.
Reserve return rate was 3.5%.
Total revenue and reserve income were $694.1 million.
Distribution, trading, and other costs were $406.8 million.
Revenue less distribution costs was approximately $287.4 million. (SEC)

After simple annualization of Q1 data:

Circle's current RLDC monetization rate is approximately 9 times that of BlackRock's ETF overall revenue rate.

3. Notable differences

This comparison has accounting basis differences:

BlackRock's 17 basis points belong to revenue and have not deducted company operating expenses.
Circle's 153 basis points have already deducted distribution, trading, and other costs and have not deducted company operating expenses.

Additionally:

Circle's high monetization rate heavily relies on market interest rates.
ETF underlying asset income belongs to fund holders, while USDC reserve income is primarily shared between issuers and channels.

Thus, Circle currently has higher unit asset income, but its income stability and channel control are weaker than those of mature ETF management fee models.

4. How large must Circle scale to gradually become ETF-like?

Assuming Circle needs to pass more reserve income to channels or users in the future while operating at a lower net fee rate, USDC scale must significantly increase.

Taking Q1 2026 RLDC simple annualization of approximately $1.148 billion as a reference:
This table reveals the most core variables for CRCL valuation:

USDC circulation scale and Circle's net monetization rate must be analyzed simultaneously.

Reaching $500 billion in USDC circulation does not automatically mean Circle profits significantly. If the net monetization rate compresses to 10 to 20 basis points, Circle would still need to rely on service income and massive scale to support high profits.

9. Seven insights from the ETF business model for Circle

1. Build USDC into a "core broad-based ETF"

Core ETFs like IVV rely on low fees, deep liquidity, and broad distribution to achieve scale.

The asset layer of USDC should also maintain:

Low friction for minting and redemption.
Low costs for cross-chain transfers.
Broad wallet and exchange support.
High transparency of reserves.
Reliable $1 exchange.
As unified native liquidity as possible.

USDC itself is more suitable as a core product with low fees, high scale, and broad coverage.

2. High profits should come from USDC peripheral services

In the ETF industry, low-fee broad-based products can serve as customer entry points, while high-fee active products, thematic products, securities lending, and technology services enhance overall income.

Circle can adopt a similar structure:

The most reasonable business structure is: USDC is responsible for scale and network effects, while CPN, StableFX, compliance, treasury, billing, and developer services are responsible for charging.

3. Build Circle Mint participants into an open, competitive AP network

ETFs do not rely solely on one authorized participant. Multiple APs and market makers can:

Enhance creation and redemption capabilities.
Reduce single points of failure.
Narrow price deviations.
Decrease issuer dependence on a single channel.
Improve liquidity during stress periods.

Circle needs to continuously increase:

Banks capable of directly minting and redeeming USDC.
Institutional traders.
Market makers.
Payment service providers.
Cross-regional fiat exchange nodes.
Liquidity institutions capable of weekend and round-the-clock operations.

The more Circle relies on a few channels, the more likely USDC scale will strengthen the bargaining power of those channels.

4. Enable channels to earn through their own services

In a mature ETF ecosystem, brokers, market makers, and APs can earn income through bid-ask spreads, customer flow, asset management, and arbitrage.

Circle's ideal state should be:

Exchanges earn through trading and custody.
Wallets earn through payments, exchanges, and financial services.
Banks earn through treasury, foreign exchange, and settlements.
PSPs earn through merchant services.
Market makers earn through spreads and liquidity services.

Circle retains stablecoin issuance, network, and infrastructure costs.

This way, the economic motivation for channels to access USDC comes from their own business growth, and reliance on Circle's reserve income subsidies can gradually decrease.

5. Liquidity indicators should be higher than mere circulation volume

ETF investors do not only look at AUM; they also consider spreads, trading volumes, premiums/discounts, and creation/redemption capabilities.

Circle investors should also continuously observe:

The bid-ask spread of USDC against the dollar.
The trading depth of USDC against USDT.
Large redemption capabilities.
The number of bank channels.
Weekend exchange capabilities.
The number of independent Circle Mint institutions.
The proportion of on-chain collateral.
Default settlement asset shares.
Concentration of single exchanges and blockchains.
Marginal distribution costs corresponding to newly added USDC.

A truly strong liquidity network means:

When channels lack USDC, they will bear higher exchange costs, poorer trading depth, fewer customers, and weaker product capabilities.

6. Avoid liquidity fragmentation

If ETF issuers launch a large number of highly similar small ETFs, it can easily disperse AUM and trading liquidity.

Circle also needs to be cautious of:

Non-native bridging of USDC across different chains.
Various incompatible wrapped assets.
Excessive custom stablecoins.
Liquidity fragmentation between Arc and existing public chains.
Partner-issued assets substituting USDC.

The strategic value of CCTP, Gateway, and native USDC lies in unifying cross-chain liquidity back into the same issuance and redemption system.

7. Network leadership and high fees can be separated in the long term

IVV has enormous scale, deep liquidity, and strong distribution capabilities, yet its fee rate is still only 3 basis points.

This provides a very direct warning to Circle investors:

Even if USDC becomes the core asset of the digital financial system, competition, channel bargaining, and standardization may continue to pressure Circle's unit monetization rate downward.

The success of the USDC network and high profits for CRCL are two related but independent propositions.

Circle needs to simultaneously prove:

Continuous growth in USDC circulation.
USDC becoming the default collateral and settlement asset.
Decreasing marginal distribution costs.
Natural growth outside of Coinbase increasing.
The proportion of non-interest income rising.
CPN, StableFX, Arc, and developer products forming independent charges.
Circle's income distribution ratio to channels stabilizing or declining.

10. Final Judgment

The history of ETF issuers proves that a company does not need to directly own end accounts to establish a massive financial network through institutional primary markets, channel distribution, and standardized products.

It also provides a more important warning:

The more standardized a financial network, the lower the core product fee rates tend to be.

Circle's current economic structure is more favorable than that of ordinary ETF issuers. In Q1 2026, Circle's annualized unit monetization rate after deducting distribution, trading, and other costs was approximately 153 basis points, far exceeding BlackRock ETF's overall revenue rate of about 17 basis points.

The sources of this advantage include high interest rates, USDC holders not directly receiving reserve earnings, and Circle still being in the rapid expansion phase of the stablecoin network. As interest rates decline, stablecoin competition intensifies, channel demands for more earnings increase, and user earnings transmission expands, Circle's unit monetization rate faces long-term compression pressure.

Therefore, the most important insight from the ETF analogy for CRCL is:

USDC can become a massive digital dollar core asset, and Circle needs to build a high-value charging layer on top of USDC to avoid ultimately becoming a low-fee, heavily channel-shared stablecoin issuance public utility.

From an investment perspective, Circle's most ideal endgame can be summarized as:

The asset layer like iShares, the liquidity layer like Visa and Mastercard, the institutional network like SWIFT, and the developer and enterprise service layer like Aladdin and AWS.

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