Circle Expands Beyond USDC as Payments Network and Arc Strategy Take Shape

Circle is accelerating a shift from a pure stablecoin issuer into a broader, vertically integrated digital-asset infrastructure provider—an evolution that could reduce its heavy reliance on interest income as the rate cycle turns. A new report from Tiger Research argues that the company is increasingly tying USDC issuance, its in-house payments network, a proprietary blockchain, and an emerging AI payments stack into a single growth architecture designed to compound distribution and fee generation over the long term.

The pivot comes as Circle’s fundamentals continue to be dominated by USDC-linked reserve economics. In its 2026 first quarter, Circle posted revenue of $694 million, up 20% year over year, while adjusted EBITDA rose 24% to $151 million, translating to a 53% adjusted EBITDA margin. Yet the underlying mix remains largely unchanged: roughly 94% of revenue was still derived from reserve interest income, leaving the business structurally exposed if benchmark rates fall further.

What stood out in the quarter, however, was a notable improvement in profitability despite a decline in reserve yields. Tiger Research noted that reserve yield slipped 31 basis points quarter over quarter, from 3.81% to 3.50%, but Circle’s realized revenue margin climbed to a record 41.4%. The report attributes the margin expansion to a growing share of USDC activity migrating onto Circle’s own rails, where the company retains a larger portion of economics.

According to the analysis, the share of USDC utilization routed through Circle-controlled platforms jumped from 6% to 17.2% in one quarter, while reliance on third-party platforms fell, with external-platform share dropping to about 55%. The distinction matters because USDC deposited on partner platforms typically requires interest-sharing arrangements, whereas balances and flows kept within Circle Mint or the Circle Payments Network (CPN) allow Circle to capture reserve income more directly. Tiger Research characterized the shift as an improvement in Circle’s 'profit quality' rather than merely headline growth.

CPN’s expansion appears to be a key driver of that mix change. Tiger Research said the number of participating financial institutions rose to 136 within a single quarter, while annualized payment throughput climbed to roughly $8.3 billion. If sustained, higher CPN penetration could help Circle build a recurring revenue base around payment processing, treasury workflows, and settlement services—areas where it can potentially earn fees and keep more of the spread tied to USDC reserves.

Still, the bottom line told a more complicated story. Net income in the quarter fell about 15% year over year to approximately $55 million, even as adjusted profitability improved. Tiger Research pointed to rising stock-based compensation following Circle’s public-market transition and a step-up in infrastructure and R&D spending ahead of the Arc mainnet launch. The result is a familiar trade-off for scaling platforms: stronger operational metrics paired with earnings pressure from front-loaded investment.

Tiger Research frames Circle’s strategy around three growth pillars, with USDC at the center. The first is expanding USDC circulation, which the report places at roughly $77 billion. A major distribution lever highlighted in the report is Circle’s deepening integration with decentralized trading venue Hyperliquid, which adopted USDC as an official base trading pair in place of its prior in-house stablecoin. The move ties Hyperliquid’s expansion more directly to incremental USDC issuance demand.

Hyperliquid’s total value locked (TVL) reportedly doubled from around $2 billion in 2025’s first quarter to $4 billion in 2026’s first quarter, at one point reaching $6 billion. Tiger Research suggested that, if momentum persists, a single venue could evolve into a channel responsible for more than 10% of total USDC circulation—an implication that underscored how concentrated and powerful stablecoin distribution partnerships can become.

The catch is near-term margin trade-offs. USDC growth via external platforms can require Circle to share a meaningful portion of reserve-related economics with ecosystem partners, potentially weighing on profitability in the short run. Even so, Tiger Research argued that the 'land-grab' value—access to deep liquidity, high-velocity trading activity, and derivatives-adjacent flows—may justify conceding some margin in exchange for stronger network effects and longer-duration demand.

The second pillar is Arc, Circle’s planned Layer 1 blockchain. With most revenue still tied to interest rates, Circle has a clear incentive to build fee-generating infrastructure that can remain resilient across macro regimes. Arc is positioned as a settlement and execution layer for cross-border payments and on-chain FX, with Circle aiming to funnel institutional payment traffic through CPN while monetizing conversion flows through a product dubbed StableFX.

Tiger Research emphasized that Arc’s pitch is grounded in well-known inefficiencies in legacy rails. World Bank data cited in the report put average global remittance costs at 6.36%, and bank transfer costs as high as 14.99%, reflecting SWIFT’s multi-hop structure, opaque FX spreads, and slow settlement cycles. Arc-based StableFX, by contrast, is described as using an RFQ model in which multiple market makers compete in real time—an approach designed to tighten spreads, lower costs, and enable always-on settlement.

Early network indicators, while still pre-revenue, appear to be part of Circle’s narrative-building. On ArcScan, Tiger Research noted cumulative testnet transactions of about 430 million and a 24-hour throughput of roughly 3.26 million transactions. The firm also pointed to participation from more than 100 institutions, including BlackRock, HSBC, Visa, and Amazon Web Services, as a sign of industry interest. Meaningful monetization, however, is expected only after mainnet launch and real transaction volumes migrate onto paid services.

The third pillar—more speculative by the report’s own framing—is an AI-driven payments infrastructure. Circle is promoting what it calls the 'Circle Agent Stack', a toolkit aimed at enabling autonomous, machine-to-machine micropayments using USDC. The stack includes components such as agent wallets, an agent marketplace, nano-payments support, a CLI, and modular financial functions, with the goal of making on-chain stablecoin payments a default settlement method for AI agents purchasing services and reconciling costs without human intervention.

Tiger Research said the premise targets a weakness in card-centric payment systems: fees and fixed costs can make true micropayments uneconomical, whereas on-chain settlement could bring costs down and improve programmability. At the same time, the report cautioned that this segment is still largely a forward-looking bet, with Circle outlining a staged timeline—2026 for infrastructure buildout, 2027 for regulatory normalization, and 2028 for commercialization.

Regulation remains a key swing factor. Tiger Research argued that if the U.S. 'GENIUS Act' provides a stable legal framework for stablecoins, large enterprises and platform operators could adopt AI payment systems with reduced compliance uncertainty. In that scenario, the agent stack may contribute less to near-term earnings than to a higher 'platform premium'—a narrative that could influence how markets value Circle beyond reserve-driven cash flows.

Overall, Tiger Research’s assessment is that Circle is pursuing a deliberate 'vertical integration' strategy: grow USDC supply, route more activity through CPN and Circle Mint, launch Arc to create fee-based settlement and FX revenue, and position AI-native payments as an option on next-generation digital commerce. The near-term question is whether Circle can continue shifting volume onto its own rails while sustaining USDC distribution growth. The longer-term test is whether CPN and Arc can translate adoption into durable fee revenue, allowing Circle to be valued as a comprehensive financial infrastructure company rather than a rate-sensitive stablecoin issuer.