A new agreement between Circle, Coinbase, and the decentralized exchange Hyperliquid creates serious risks for the USDC stablecoin economy. In my assessment, this event could fundamentally alter the revenue dynamics of key market players. JPMorgan analysts have already revised their profit forecasts for both companies downward.
The Essence of the Changes
In May, Coinbase and Circle updated their partnership terms with Hyperliquid. The U.S. exchange now counts USDC held on the perp-DEX as assets "on the platform" and earns income from the reserves of these funds. At the same time, 90% of this amount is passed on to Hyperliquid. Previously, as I found out, Coinbase shared USDC reserve income with Circle almost equally.
Hyperliquid currently holds about $6 billion in USDC, which accounts for approximately 8% of the total token supply in circulation. The platform is already among the largest trading venues in the crypto industry and is a leader among decentralized perpetual futures exchanges. In July, Hyperliquid's trading volume exceeded $150 billion, and its share relative to Binance grew to 11.5%.
"Prisoner's Dilemma"
JPMorgan called the new scheme a "prisoner's dilemma" for Circle and Coinbase. In my view, this is indeed a classic example of a conflict of interest, where both companies are forced to compete for USDC distribution, which could ultimately undermine their margins. The bank's experts noted that the change in partnership terms with Hyperliquid demonstrates the vulnerability of the current model.
An additional pressure factor has been the weakening of the crypto market. Since March, the volume of Circle's stablecoin in circulation has decreased from $80 billion to $73 billion. The market capitalization of the entire "stablecoin" sector has fallen by $10 billion since May. However, JPMorgan emphasized that in the long term, higher interest rates could partially support income from USDC reserves.
Japanese Vector
Amid these developments, Circle is taking steps to expand USDC's geographic reach. 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 at Japanese merchants, including by tourists.
JCB serves approximately 140 million cardholders and over 40 million merchant locations worldwide. Previously, Circle also announced a joint project with Japan's Nomura to launch a currency settlement service based on USDC, which is planned to go live in 2027.
My expert conclusion: The partnership with Hyperliquid exposes a fundamental problem: Circle and Coinbase are becoming hostages of their own successful ecosystem. If Hyperliquid continues to increase its market share, the pressure on the USDC economy will only intensify. Entering the Japanese market is a strategically sound move, but it is unlikely to compensate for the losses from renegotiating terms with major DeFi protocols.