United States (US)-based digital asset issuer and infrastructure provider, Circle, is advancing global adoption of stablecoins. As the issuer of USD Coin (USDC), a US dollar-backed stablecoin valued at $36.5 billion, world’s second-largest by market capitalisation, Circle aims to make stablecoins accessible and reliable for payments worldwide. Chan Yam Ki, vice president of strategy and policy at Circle, highlighted the company’s focus on regulatory compliance, transparency, technological infrastructure and financial inclusion.

Stablecoins are digital assets pegged to fiat currencies, designed to maintain stable value and offer a more reliable payment option than other cryptocurrencies. As Chan described, stablecoins act as “tokenised cash,” a decentralised global payment tool that “breaks down the walled gardens that exist today.” By enabling faster, cheaper transactions, stablecoins bring the utility of traditional money into digital form, benefitting both individuals and businesses.

Stablecoin market pushes for regulation and adoption

The global digital asset market continues to grow with the increasing adoption of blockchain or decentralised ledger technology that enables faster, lower-cost transactions by reducing reliance on intermediaries, facilitating automated reconciliation and compliance, and achieving atomic or instant settlement, such as smart contracts. Chan stated, “The industry has evolved across various areas, from regulatory structures to business models, technology and adoption.”

According to DefiLlama, the stablecoin market reached $180 billion in capitalisation in November 2024, nearing its 2022 peak of $187 billion. Stablecoins are being applied in new ways, such as Singapore’s Project Orchid, which explores purpose-bound money (PBM) to programme transactions. PBM is a blockchain-based protocol that establishes conditions on how digital currency may or may not be used, potentially supporting more secure and compliant transactions.

Regulatory clarity has been essential for stablecoin's growth. The European Union’s (EU) Markets in Crypto-Assets (MiCA) regulation and Singapore’s regulatory framework have established standards for consumer protection, compliance and operational requirements. Circle claims to be the first stablecoin issuer to comply with MiCA and holds a Major Payment Institution (MPI) licence from the Monetary Authority of Singapore (MAS), allowing it to provide digital asset-based payment services in Singapore. “By the end of next year, there will be rules across Europe, Japan, Hong Kong, Singapore and the United States,” stated Chan. These regulations build institutional trust and enable stablecoin use for cross-border payments by creating consistent regulatory standards.

Building trust through transparency and reliability

Circle builds trust through transparency and conservative reserve management, ensuring each USDC is backed by cash and short-term US Treasuries. The majority of Circle’s reserves are held under the Circle Reserve Fund, managed by BlackRock, a leading US-based asset and investment management firm. The fund is fully registered with the US Securities and Exchange Commission (SEC), reinforcing its credibility and regulatory compliance.

“A well-regulated stablecoin offers intrinsic value by maintaining a one-to-one backing that is transparent and verifiable,” said Chan. Regulatory frameworks also influence specific transparency measures required from Circle. For example, under MiCA, Circle must hold reserves in high-quality, liquid assets, with at least 60% in cash at EU banks.

Circle further enhances trust by undergoing monthly attestations from a big-four auditing firm, and has previously filed reports with the SEC in 2018 and 2021, a level of transparency it believes is not yet matched by other stablecoins. “With a well-regulated stablecoin and assets held with a trusted custodian, there should be sufficient clarity, transparency and controls for global regulators,” noted Chan. By embedding trust and compliance into its operational framework, Circle aims to gain greater investor and customer confidence in positioning USDC as a stable and reliable digital asset in the financial ecosystem.

Maintaining stability in a volatile market

However, Circle’s focus on stability was tested when USDC briefly lost its peg to the dollar in secondary trading markets. Chan attributes this “depeg” to “a bank failure, which created volatility in the digital market,” noting that Circle maintained its one-to-one redemption in primary markets. “While secondary markets may see fluctuations, our focus in payments is not speculation but on using USDC for transactions tied to real economic activity,” explained Chan.

The competitive landscape is evolving as major payment service providers (PSPs) like Paypal, which issues the PayPal USD, and banks like JPMorgan, which offers Kinexys Digital Payments, have entered the stablecoin market, signalling potential mainstream acceptance and pushing established players like Circle to innovate further and stand out.

Promoting stablecoin adoption by expanding interoperability

Circle promotes financial inclusion, especially in Asia, Latin America and Africa, where stablecoins enable faster cross-border transactions. “In Asia, there’s a need for faster money movement with multiple currencies across economies, given the region’s high trade-to-gross domestic product ratio,” noted Chan.

For stablecoins to achieve broader adoption, Chan emphasised the importance of interoperability across blockchain networks. “Interoperability between platforms and stablecoins isn’t as prevalent as we’d like.” Circle has partnered with a PSP, Thunes, which uses USDC for cross-border transactions. Unlike current Society for Worldwide Interbank Financial Telecommunications (SWIFT) requirements, blockchain transactions can occur outside traditional banking hours, offering faster and more flexible options for international payments.  “Adoption increases as regulations become clearer,” added Chan, predicting that “more enterprises and institutions will start the transition to Web3.” Web3 is the next evolution of decentralised internet where users directly own and control their data and digital assets using blockchain technology.

Supporting enterprises with infrastructure for digital assets

Circle also provides infrastructure to streamline blockchain adoption for businesses, such as its programmable Web3 wallet. “While some companies launch their wallets, large enterprises want to build on the blockchain but lack the talent or infrastructure,” explained Chan. The wallet allows businesses to create custom applications through application programming interfaces (APIs), making blockchain more accessible.

Companies like Grab in Singapore have adopted Circle’s Web3 wallet to create new metaverse experiences, and Hong Kong Telecom plans to use it for its loyalty platform. Chan clarified that Circle’s infrastructure is designed to support, not compete with other Web3 wallets, “A Web3 wallet is required to interact on the blockchain rails, and we’re making it easier and more accessible for developers and large enterprises.”

Additionally, Circle’s ‘Compliance Engine’ tool automates anti-money laundering compliance with transaction screening to detect suspicious transactions, monitoring tools to identify potential high-risk behaviours, and maintaining compliance with global travel rule requirements for large on-chain transactions, helping businesses with real-time risk assessments.

Lowering costs can unlock new business models but lower profitability

Blockchain’s potential to lower transaction costs could unlock new business models, mainly through micropayments. Small, frequent transactions that are uneconomical due to high fees. Chan noted, “In this next phase with blockchain, we expect money transfer costs to become negligible.” He compared its parallel with Web1 and Web2, where “messaging costs and data costs dropped to zero,” leading to new business models like online advertising and streaming.

Lower fees could make global commerce more accessible. “It’s the economies of scale and the use cases that emerge when certain costs disappear,” said Chan. “Imagine what commerce will look like for payments as low as five cents.”

However, Circle’s focus on regulatory compliance and conservative reserve practices, while ensuring financial stability and consumer trust, may influence its profitability model. The company prioritises backing its USDC reserves with low-risk assets such as US treasury bills and charges fees only on redemptions exceeding $2 million. This profitability model may contrast with non-regulated stablecoins that often pursue higher-yield investments and redemption fees to boost revenue.

While Circle’s focus on transparency and financial inclusion strengthens trust in its ecosystem, navigating profitability amid rising compliance costs and changing interest rates which present a strategic challenge. Circle has over $400 million in excess reserves as of December 2024, but the income generated from it, a key revenue source, could become less predictable as interest rates fluctuate. Despite these factors, Circle continues to expand its ecosystem with innovative services and infrastructure that can diversify new revenue streams.

A strategic path forward for stablecoins

Circle’s commitment to regulatory engagement, transparency, innovative technology and financial inclusion positions it as a key participant in the digital finance landscape. As new competitors and established institutions enter the stablecoin market, Circle’s regulatory-first approach and focus on stability will need to evolve with ongoing innovation to stay ahead. Proactive collaboration with industry and regulators will be essential to unlock new use cases for stablecoins, advancing towards a more inclusive and accessible global financial system.