A new partnership between Circle, Coinbase, and the Hyperliquid platform is radically changing the economics of the USDC stablecoin and creating serious risks for both companies. JPMorgan analysts have revised their profit forecasts for Circle and Coinbase downward, pointing to structural problems in their business models.
The Essence of the Deal and Its Consequences
In May, Coinbase and Circle revised the terms of their cooperation with Hyperliquid. Under the updated scheme, the American exchange now accounts for USDC held on the decentralized perpetual futures exchange (perp-DEX) Hyperliquid as assets located "on the platform." This allows Coinbase to earn income from the reserves of these funds, but 90% of this amount is immediately transferred to Hyperliquid. Previously, income from USDC reserves was split almost equally between Coinbase and Circle.
Such a disparity is a warning sign. Hyperliquid holds approximately $6 billion in USDC, which accounts for about 8% of the total token supply in circulation. The platform is one of the leaders among decentralized exchanges and ranks among the largest trading venues in the crypto industry. In July, trading volume on Hyperliquid exceeded $150 billion, and its share relative to Binance reached 11.5%.
The "Prisoner's Dilemma" for Issuers
JPMorgan analysts called the new scheme a "prisoner's dilemma" for Circle and Coinbase. The point is that both companies are now forced to compete for the right to distribute USDC, which could lead to further deterioration of terms and reduced profitability. "The change in the relationship with Hyperliquid demonstrates how fragile partnership agreements can be in this area," the bank's experts note. Additional pressure on both companies comes from the general weakening of the crypto market: since March, the volume of USDC in circulation has decreased from $80 billion to $73 billion, and the capitalization of the entire stablecoin sector has fallen by $10 billion since May.
However, JPMorgan acknowledges that in the long term, high interest rates may partially offset losses from USDC reserves. But the current situation remains tense.
Expansion into Japan as a Diversification Attempt
Against this backdrop, Circle is actively seeking new markets. On July 14, Japan's largest payment system, JCB, signed a memorandum of understanding with Circle to develop solutions based on stablecoins. The companies plan to explore the possibility of using USDC for cross-border payments, domestic settlements, and payments for goods from Japanese merchants, including by tourists. The first phase will be a pilot for internal fund transfers at JCB.
JCB serves approximately 140 million cardholders and over 40 million merchant locations worldwide. Previously, Circle also announced a joint project with Japanese financial corporation Nomura to launch a currency settlement service based on USDC for local companies, which is planned to launch in 2027.
My comment: The situation with Hyperliquid is a vivid example of how decentralized platforms are beginning to dictate terms even to the largest stablecoin issuers. If Circle and Coinbase do not find a way to restore the balance of power, their margins will continue to decline. Expansion into Japan is a logical step, but it is unlikely to solve the fundamental problems associated with the redistribution of income from reserves.