The recently updated terms of cooperation between Circle, Coinbase, and the Hyperliquid platform raise serious questions about the sustainability of the USDC stablecoin revenue model. In my analysis, this deal, concluded in May, creates an unexpected competitive dynamic that could undermine the positions of both companies.
New Revenue Scheme: Who Benefits?
According to the updated agreement, Coinbase now classifies USDC held on Hyperliquid as an asset "on the platform." This allows the exchange to earn income from the reserves of these funds, after which 90% of this amount is transferred to Hyperliquid. Previously, as I understand from market practice, reserve income was split almost equally between Circle and Coinbase. This redistribution of benefits in favor of Hyperliquid is a worrying signal.
Hyperliquid, in turn, holds approximately $6 billion in USDC, accounting for about 8% of the total token in circulation. The platform confidently leads among decentralized perpetual futures exchanges, and in July, its trading volume exceeded $150 billion. Hyperliquid's share relative to Binance reached 11.5% — an impressive growth that, however, creates dependency for USDC issuers.
The "Prisoner's Dilemma" for Circle and Coinbase
JPMorgan analysts, with whom I fully agree, have called this situation a "prisoner's dilemma." The essence is that Circle and Coinbase, instead of jointly benefiting from USDC, are now forced to compete for the right to distribute the stablecoin, handing over the lion's share of profits to Hyperliquid. This inevitably leads to a decline in margins for both parties. Against this backdrop, the bank has already lowered profit forecasts for Circle and Coinbase.
An additional pressure factor is the overall weakening of the crypto market. Since March, the volume of USDC in circulation has decreased from $80 billion to $73 billion, and the market capitalization of the entire stablecoin sector has fallen by $10 billion since May. Although JPMorgan notes that high interest rates could support reserve income in the long term, the current dynamics are concerning.
Japan as a New Front for USDC Expansion
Against this backdrop, Circle is taking steps to diversify. On July 14, Japan's largest payment system, JCB, signed a memorandum of understanding with Circle to develop stablecoin-based solutions. Plans include using USDC for cross-border payments, domestic settlements, and tourist payments for goods. Given that JCB serves 140 million cardholders and 40 million merchant locations worldwide, this could become a significant driver for USDC.
Additionally, at the end of June, Circle announced a joint project with Nomura to launch a USDC-based currency settlement service for Japanese companies, expected to start in 2027. However, despite these positive initiatives, the current partnership with Hyperliquid, in my view, creates a structural risk for the USDC economy that regional expansion does not offset.
My professional opinion: the deal with Hyperliquid is a classic example of short-term gain at the expense of long-term stability. Circle and Coinbase urgently need to reconsider the terms or find alternative distribution channels for USDC; otherwise, their margins will continue to shrink, and their dependence on a single platform will grow.