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WorldbyFlow•Structured Research
Generated August 18, 2026· finance· 33 sources

Stablecoin Reserve Income: From User Deposits to Issuer Profit

Follow the Money
Who Really Profits
Stablecoin holders fund a zero-interest liability that issuers convert into a Treasury-yield asset — Tether keeps essentially all of that spread while Circle is contractually forced to hand roughly half of its gross reserve income to Coinbase, meaning the platform that distributes USDC captures more economic value from the token than the company that issues it.
Total at Stake~$2.75B in Circle FY2025 total revenue and reserve income, of which $2.637B was reserve income (Circle FY2025 10-K-derived figures); Tether's 2025 net profit exceeded $10B on ~$141B in Treasury exposure (Tether Q4 2025 BDO attestation)

Overview

This maps how dollars deposited by stablecoin users become Treasury-bill purchases, how the resulting interest income is captured almost entirely by issuers rather than token holders, and how that income is split with distribution partners and custodians. The two dominant issuers, Tether (USDT) and Circle (USDC), together hold well over $200 billion in short-term US government paper, making the mechanism material both to issuer profitability and to Treasury bill demand.

Brief

The mechanism is structurally simple and economically large. A user sends dollars to Tether or Circle and receives a stablecoin token in return; that token pays no interest to the holder. The issuer takes the cash and buys short-dated Treasury bills, repo, or shares in a government money-market fund. Under the GENIUS Act, signed into law July 18, 2025, payment stablecoin issuers must hold at least one dollar of permitted reserves per dollar issued, restricted to cash, insured deposits, Treasury bills of 93 days or less, qualifying repo, and government money market funds. This legal structure is what converts a stablecoin float into a captive pool of short-duration Treasury demand: the issuer earns the entire yield differential between a zero-coupon liability and a yielding Treasury asset, and by law that asset pool cannot wander into higher-yielding but riskier instruments.
Tether's Q4 2025 attestation, prepared by BDO and published by the company, disclosed total assets exceeding $192.9 billion against liabilities of $186.5 billion in digital tokens issued, with more than $10 billion in net profit for 2025 and a record roughly $141 billion in direct and indirect US Treasury exposure. By Q1 2026, Tether's attestation showed total assets of about $191.8 billion against liabilities of approximately $183.5 billion, with $1.04 billion in quarterly net profit and Treasury exposure still around $141 billion, a level the company said made it the 17th-largest holder of US Treasuries globally. Tether does not share this income with any distribution partner or with USDT holders; the entire reserve-yield spread accrues to the privately held issuer, whose profits also fund a separate, reserve-segregated investment portfolio in AI, energy, and other ventures that Tether says exceeded $20 billion in Q4 2025.
Circle's model runs the same mechanism through a materially different revenue-capture structure. Circle's FY2025 10-K-derived figures show reserve income of $2.637 billion out of $2.747 billion in total revenue and reserve income for the year, with the balance of $110 million from other revenue. In the second quarter of 2026, Circle's CEO confirmed on the August 5, 2026 earnings call that its Collaboration Agreement with Coinbase, originally signed August 18, 2023, had renewed on the same terms through 2029: Coinbase collects 100% of reserve income on USDC held on its own platform, and 50% of the residual reserve income on USDC held everywhere else, after Circle's issuer allocation. In 2024 this arrangement cost Circle $908 million out of roughly $1.01 billion in total distribution costs, a payment that consumed about 54% of Circle's total revenue that year. Circle's own Q2 2026 filings show USDC circulation of $73.3 billion with Coinbase holding roughly 30% of that circulating supply, meaning a minority share of on-platform balances plus the 50% off-platform clause is what generates Coinbase's outsized claim on Circle's gross reserve income.
On the asset side, Circle's most recent 10-Q (period ended June 30, 2026) shows USDC reserves split between $11.428 billion in bank cash, yielding 2.98% average, and $61.917 billion in the Circle Reserve Fund, yielding 3.57% average — a government money market fund registered under the Investment Company Act's Rule 2a-7 and disclosed as managed via BlackRock. As of that filing, approximately 84% of USDC reserves sat in the Circle Reserve Fund rather than bank cash, and FDIC insurance covering the bank-deposit portion was limited to an aggregate $1.8 million across seven insured institutions — a figure dwarfed by the scale of reserves actually held, underscoring that USDC holders' effective protection rests on the segregated-reserve and money-market-fund structure rather than deposit insurance. Circle's Q1 2026 results showed the mechanical sensitivity of this model to rates: reserve income of $653 million grew 17% year-over-year, driven by 39% growth in average USDC in circulation but partially offset by a 66-basis-point decline in the reserve return rate, illustrating that reserve income is a function of both float growth and the prevailing short-term rate environment — a rate environment where the Fed Funds Rate stood at 3.63% as of July 2026, essentially flat over the prior period, according to the supplementary indicator data.
The custodial layer is the least transparent part of the chain. Tether's reserve mix is disclosed only through quarterly BDO Italia limited-assurance attestations, not a full audit by a major accounting firm, and the underlying custodial and counterparty arrangements for its roughly 80% Treasury-linked allocation are not broken out to bond-level detail in public disclosures. Circle's reserves are more granularly disclosed in SEC filings because Circle is a US public company (NYSE: CRCL), but the specific fee Circle or the Circle Reserve Fund pays to its money-market-fund manager is not separately quantified in the reviewed filings excerpts, and the full text of the Coinbase-Circle Collaboration Agreement's fee mechanics beyond the headline 100%/50% split has not been independently re-verified beyond the company's own characterization on the earnings call.

Money Flows (10)

USDT holders / crypto market participants→Tether International S.A. de C.V.
Investment~$183.5B in liabilities from digital tokens issued (Q1 2026)· RecurringHigh conf.
Users deposit dollars to mint USDT, creating a non-interest-bearing liability for Tether against which it holds reserve assets
Basis: Tether Q1 2026 BDO attestation, as reported via TradingView/Cointelegraph, May 2026
Tether International S.A. de C.V.→US Treasury (via bills, repo, money market funds)
Investment~$141B in direct and indirect Treasury exposure· RecurringHigh conf.
Reserve deployment into short-dated Treasury bills, reverse repo, and money market funds to back USDT 1:1 per GENIUS Act reserve rules
Basis: Tether Q1 2026 BDO attestation; corroborated by Q4 2025 attestation showing the same record level
US Treasury / short-term bill market→Tether International S.A. de C.V.
Revenue$10B+ net profit in 2025· AnnualHigh conf.
Interest/yield earned on the ~$141B Treasury-linked reserve pool, captured entirely by Tether with no pass-through to USDT holders
Basis: Tether Q4 2025 BDO attestation, published by Tether, January 2026
Tether International S.A. de C.V.→Tether Global Investment Fund SICAF S.A. (segregated proprietary vehicle)
Investment>$20B investment portfolio (Q4 2025)· One-time/RecurringMedium conf.
Excess profits and capital, disclosed as segregated from USDT reserves, redeployed into AI, energy, gold, and other proprietary ventures
Basis: Tether Q4 2025 BDO attestation / company statement, January 2026
USDC holders / crypto market participants→Circle Internet Group, Inc.
Investment$77.0B USDC in circulation at Q1 2026 quarter end· RecurringHigh conf.
Users deposit dollars to mint USDC, creating a non-interest-bearing liability for Circle against which reserves are held
Basis: Circle Q1 2026 earnings release, May 11, 2026
Circle Internet Group, Inc.→Circle Reserve Fund (BlackRock-managed government money market fund) / bank cash deposits
Investment$61.917B in the Circle Reserve Fund and $11.428B in bank cash (as of June 30, 2026)· RecurringHigh conf.
Reserve deployment into a Rule 2a-7 government money market fund holding Treasuries and repo, plus bank deposits, to back USDC 1:1
Basis: Circle Form 10-Q, filed with SEC, period ended June 30, 2026
US Treasury / short-term bill market (via Circle Reserve Fund yield)→Circle Internet Group, Inc.
Revenue$2.637B reserve income in FY2025; $653M reserve income in Q1 2026· RecurringHigh conf.
Interest/yield income on the Treasury- and cash-backed reserve pool, the core driver of Circle's gross revenue
Basis: Circle FY2025 10-K-derived figures; Circle Q1 2026 earnings release, May 11, 2026
Circle Internet Group, Inc.→Coinbase Global, Inc.
Fee$908M in 2024 (54% of Circle's 2024 total revenue)· RecurringHigh conf.
Contractual revenue share under the August 18, 2023 Collaboration Agreement (renewed through 2029): 100% of reserve income on USDC held on Coinbase's platform, plus 50% of residual reserve income on USDC held elsewhere
Basis: Circle distribution-cost disclosure as reported via Coinspeaker/KuCoin/insights4vc coverage of Circle's SEC filings, 2025-2026
Circle Internet Group, Inc.→Circle shareholders / retained earnings
RevenueFY2025 net loss attributable to common stockholders of $70M; Q1 2026 net income of $55M· Annual/QuarterlyHigh conf.
Residual reserve income after distribution costs (chiefly to Coinbase) and operating expenses including $845M of FY2025 compensation expense
Basis: Circle FY2025 10-K-derived figures; Circle Q1 2026 earnings release, May 11, 2026
US Treasury→General federal funding (via bill sales to stablecoin issuers as a buyer class)
OtherUndisclosed aggregate stablecoin-sector Treasury demand beyond Tether's ~$141B and Circle's ~$62B reserve fund allocation· RecurringLow conf.
Stablecoin issuers as a buyer class provide financing demand for short-dated bill issuance, a dynamic referenced qualitatively by market commentary but not sized in a primary Treasury source reviewed here
Basis: No single Treasury or TBAC disclosure in the reviewed sources quantifies total stablecoin-sector Treasury bill demand; figures are issuer-specific attestations, not a Treasury-side aggregate

Who Profits (4)

Tether International S.A. de C.V.

How They Gain: Tether earns the full spread between its zero-interest USDT liability and the yield on its ~$141B Treasury-linked reserve pool, with no contractual revenue share to any distribution partner or token holder.
>$10B net profit in 2025 (Tether Q4 2025 BDO attestation)

Coinbase Global, Inc.

How They Gain: Coinbase captures 100% of reserve income on USDC held on its own platform and 50% of residual reserve income on USDC held everywhere else, a contractual claim disproportionate to its roughly 30% share of USDC in circulation as of Q2 2026.
$908M received from Circle in 2024, equal to about 54% of Circle's that-year total revenue

Circle Internet Group, Inc.

How They Gain: Circle earns reserve income on the residual USDC float not captured by the Coinbase revenue share and on distribution/subscription services, though its FY2025 result was a net loss.
$2.637B FY2025 reserve income against a $70M FY2025 net loss attributable to common stockholders

BlackRock (as manager of the Circle Reserve Fund)

How They Gain: BlackRock manages the government money market fund holding the majority of USDC's reserve assets, a role that generates asset-management fee revenue from the fund's roughly $61.9B in assets, though the specific fee rate was not disclosed in the reviewed filings.
Undisclosed — fund manager fee not separately broken out in the Circle 10-Q excerpts reviewed
Who Pays (2)

USDT and USDC holders

How They Pay: Holders forgo all interest on deposited dollars; the entire Treasury-yield spread accrues to the issuer (and, for USDC, largely to Coinbase) rather than to the token holder, an opportunity cost equivalent to the prevailing short-term rate.
Opportunity cost approximated by reserve yields disclosed in filings — Circle's Circle Reserve Fund yielded 3.57% average in the quarter ended June 30, 2026 — applied against non-interest-bearing token balances

Circle Internet Group, Inc. (as net payer within its own revenue chain)

How They Pay: Despite being the issuer, Circle's FY2025 total distribution and transaction costs consumed the majority of gross reserve income, chiefly via the Coinbase revenue share, contributing to a net loss for the year.
$908M paid to Coinbase in 2024 against roughly $1.01B in total distribution costs that year; FY2025 net loss of $70M

What the Money Rewards

The GENIUS Act's reserve-asset restrictions to cash, insured deposits, short Treasury bills, repo, and government money market funds channel all stablecoin float into short-duration government paper by law, which rewards issuers for maximizing float (circulating supply) rather than for offering yield to holders — since token holders receive none of the interest regardless of scale. For Circle specifically, the Coinbase revenue-share formula rewards Coinbase for maximizing on-platform USDC balances (where it earns 100% of income) and creates an incentive misalignment where Circle bears nearly all distribution risk while a minority-share platform captures a majority of gross revenue, a structure that has already prompted commentary about Circle's exposure if Coinbase's strategic priorities shift.

Where the Trail Goes Dark

⚠Tether's reserve attestations are limited-assurance BDO Italia reports, not full audits by a major accounting firm, and the granular custodial counterparties and bond-level holdings within its ~$141B Treasury exposure are not broken out publicly
Without full-audit-level verification, the precise custodial chain and counterparty concentration behind Tether's reserve claims cannot be independently confirmed from public sources alone
⚠The fee Circle or the Circle Reserve Fund pays to its fund manager (disclosed in market commentary as BlackRock) is not separately quantified in the Circle 10-Q excerpts reviewed
This obscures how much of the gross reserve yield is consumed by asset-management fees before reaching Circle's income statement
⚠The full text and complete fee mechanics of the Circle-Coinbase Collaboration Agreement beyond the headline 100%/50% split are not independently re-verified beyond company earnings-call characterizations
Ancillary terms, minimum guarantees, or adjustment mechanisms in the agreement could alter the effective revenue split in ways not visible from public summaries

Watch Signals

  • [Likely] Circle's next quarterly 10-Q will show reserve income sensitivity to Fed policy, given Q1 2026's 66-bps year-over-year decline in reserve return rate despite 39% growth in average USDC circulation.
  • [Possible] Renewed public scrutiny of the Circle-Coinbase revenue split could resurface around Circle's future earnings calls given the agreement's confirmed renewal through 2029 was itself a live point of market uncertainty into August 2026.
  • [Possible] Tether may publish additional reserve detail or pursue a full audit (rather than limited-assurance attestation) if GENIUS Act implementing rules impose stricter disclosure requirements on payment stablecoin issuers.
  • [Unlikely] A sudden reversal of the Coinbase-Circle revenue-sharing structure within the newly confirmed multi-year term, given both parties' public confirmation of renewal on original terms in August 2026.

Open Questions

  • What specific fee does the Circle Reserve Fund's manager charge, and how much of gross reserve yield does that fee consume before reaching Circle's reported reserve income?
  • How much of the aggregate stablecoin-sector Treasury bill demand (beyond Tether's and Circle's individually disclosed holdings) is attributable to other issuers, and is there a Treasury-side (TBAC) aggregate figure that corroborates issuer-level attestations?
  • What specific custodial banks and counterparties hold Tether's cash and repo positions within its ~80% Treasury-linked reserve allocation, given the limited-assurance nature of its attestations?
  • Under the GENIUS Act's reserve rules, will implementing regulations require issuers to move from limited-assurance attestations toward full independent audits, and on what timeline?
medium uncertainty· model's epistemic confidence in this analysis

Facts & Figures (9)

The claims behind this analysis, each with its verification status — including what is contested, unverified, or could not be established.
USDT holders / crypto market participants → Tether International S.A. de C.V.: ~$183.5B in liabilities from digital tokens issued (Q1 2026)
Users deposit dollars to mint USDT, creating a non-interest-bearing liability for Tether against which it holds reserve assets
— FROM THE RECORDInvestment · basis: Tether Q1 2026 BDO attestation, as reported via TradingView/Cointelegraph, May 2026 · Recurring · High confidence
Tether International S.A. de C.V. → US Treasury (via bills, repo, money market funds): ~$141B in direct and indirect Treasury exposure
Reserve deployment into short-dated Treasury bills, reverse repo, and money market funds to back USDT 1:1 per GENIUS Act reserve rules
— FROM THE RECORDInvestment · basis: Tether Q1 2026 BDO attestation; corroborated by Q4 2025 attestation showing the same record level · Recurring · High confidence
US Treasury / short-term bill market → Tether International S.A. de C.V.: $10B+ net profit in 2025
Interest/yield earned on the ~$141B Treasury-linked reserve pool, captured entirely by Tether with no pass-through to USDT holders
— FROM THE RECORDRevenue · basis: Tether Q4 2025 BDO attestation, published by Tether, January 2026 · Annual · High confidence
Tether International S.A. de C.V. → Tether Global Investment Fund SICAF S.A. (segregated proprietary vehicle): >$20B investment portfolio (Q4 2025)
Excess profits and capital, disclosed as segregated from USDT reserves, redeployed into AI, energy, gold, and other proprietary ventures
— FROM THE RECORDInvestment · basis: Tether Q4 2025 BDO attestation / company statement, January 2026 · One-time/Recurring · Medium confidence
USDC holders / crypto market participants → Circle Internet Group, Inc.: $77.0B USDC in circulation at Q1 2026 quarter end
Users deposit dollars to mint USDC, creating a non-interest-bearing liability for Circle against which reserves are held
— FROM THE RECORDInvestment · basis: Circle Q1 2026 earnings release, May 11, 2026 · Recurring · High confidence
Circle Internet Group, Inc. → Circle Reserve Fund (BlackRock-managed government money market fund) / bank cash deposits: $61.917B in the Circle Reserve Fund and $11.428B in bank cash (as of June 30, 2026)
Reserve deployment into a Rule 2a-7 government money market fund holding Treasuries and repo, plus bank deposits, to back USDC 1:1
— FROM THE RECORDInvestment · basis: Circle Form 10-Q, filed with SEC, period ended June 30, 2026 · Recurring · High confidence
US Treasury / short-term bill market (via Circle Reserve Fund yield) → Circle Internet Group, Inc.: $2.637B reserve income in FY2025; $653M reserve income in Q1 2026
Interest/yield income on the Treasury- and cash-backed reserve pool, the core driver of Circle's gross revenue
— FROM THE RECORDRevenue · basis: Circle FY2025 10-K-derived figures; Circle Q1 2026 earnings release, May 11, 2026 · Recurring · High confidence
Circle Internet Group, Inc. → Coinbase Global, Inc.: $908M in 2024 (54% of Circle's 2024 total revenue)
Contractual revenue share under the August 18, 2023 Collaboration Agreement (renewed through 2029): 100% of reserve income on USDC held on Coinbase's platform, plus 50% of residual reserve income on USDC held elsewhere
— FROM THE RECORDFee · basis: Circle distribution-cost disclosure as reported via Coinspeaker/KuCoin/insights4vc coverage of Circle's SEC filings, 2025-2026 · Recurring · High confidence
Circle Internet Group, Inc. → Circle shareholders / retained earnings: FY2025 net loss attributable to common stockholders of $70M; Q1 2026 net income of $55M
Residual reserve income after distribution costs (chiefly to Coinbase) and operating expenses including $845M of FY2025 compensation expense
— FROM THE RECORDRevenue · basis: Circle FY2025 10-K-derived figures; Circle Q1 2026 earnings release, May 11, 2026 · Annual/Quarterly · High confidence

Sources (33)

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