SEC Has Been Probing Coinbase and Circle USDC Revenue Split for Years

For years the Securities and Exchange Commission pressed crypto exchange Coinbase to be more transparent about its relationship with stablecoin issuer Circle, recent filings show.

A batch of correspondence dated January through March 2025 was uploaded to the SEC on Tuesday.

In a January letter, the Commission’s Division of Corporation Finance requested that Coinbase clarify how “stablecoin revenue is generated, in part, from the distribution of USDC” in its future disclosures, including “the formula used to determine your share of stablecoin revenue.”

The SEC’s inquiry focused on financial statements dating back as far as 2022, requesting certain disclosures be revised and that Coinbase clarify how stablecoin revenue is recognized. The regulator’s focus on Coinbase and Circle’s relationship, among broader comments, dates back to October 2023 under former SEC Chair and critic Gary Gensler.

“From my vantage point, I do not think it has been that opaque,” Cantor Fitzgerald analyst Brett Knoblauch told Decrypt, adding that Coinbase and Circle disclose key stats that make it easy to determine how much revenue USDC’s reserves generate.

After Decrypt reached out to Coinbase for comment, the company’s Chief Legal Officer, Paul Grewal, said on X, formerly Twitter, that SEC’s requests had been “fully resolved” recently, without any requiring any “restatements or amendments” to its previous earnings statements.

“As always, we remain focused on bringing the next billion onchain,” he said, adding that Coinbase’s dialogue with the SEC started “two years after” its Wall Street debut.

A Coinbase spokesperson directed Decrypt to Grewal’s statement.

Although Coinbase has provided audited financial statements for years, the San Francisco-based firm has been somewhat guarded about its relationship with Circle. The company, which manages USDC, the industry’s second largest stablecoin by market cap, plans to go public soon.

Coinbase earns revenue from assets backing Circle’s USDC stablecoin, which is worth $60 billion, including cash and U.S. Treasuries. Coinbase disclosed in February that the firm earned $910 million in stablecoin revenue on a full year basis in 2024, up 33% from a year earlier.

That represented a new high water mark, as Coinbase looks to diversify its revenue beyond fees on user transactions. Still, Coinbase CEO Brian Armstrong declared that the firm’s new “stretch goal” was to supplant Tether’s USDT as the world “number one dollar stablecoin.”

An IPO filing submitted by Circle this month revealed that the crypto exchange receives half of Circle’s residual revenue from USDC reserves. The company said it earned $1.7 billion in revenue and reserve income in 2024.

Circle did not immediately respond to a request for comment from Decrypt.

Coinbase’s most recent earnings statement appears to include a more robust explanation of how it earns cash from USDC than its filing from the previous year. That includes details about how Circle and Coinbase’s commercial relationship has evolved.

When trading volumes were depressed in 2023, Coinbase embraced stablecoin revenue as a money maker under its subscriptions and services umbrella. The section, which includes revenue from staking and the exchange’s custody arm, temporarily eclipsed transaction revenue as the company’s main source of revenue in Q3 2023.

In August 2023, Coinbase acquired a minority share in Circle, dissolving the so-called Centre Consortium, a governing group for the U.S. dollar-pegged token founded by both firms in 2018.

Moving forward, Coinbase earned revenue from USDC reserves based on the following dynamic, per the earnings statement: “The greater the proportion of USDC in circulation generally and on our platform, the greater our revenue generated under the Circle Agreement.”

The filing states that Coinbase’s agreement with Circle was supplemented in November, allowing third parties to potentially receive fees related to USDC circulating supply as well.

Lawmakers are currently weighing legislation in Washington, D.C., that would provide a pathway to legality for stablecoin issuers like Circle and Tether. Experts believe that a regulatory framework for stablecoins could also unlock 1,000 new competitors.

Editor’s note: Updated to include comment from Cantor Fitzgerald

Edited by Stacy Elliott.