Rate Cuts Threaten Profits of Stablecoin Giants Tether and Circle
Main Idea
Upcoming US interest rate cuts threaten the profits of stablecoin issuers Tether and Circle, with Circle potentially losing up to $618 million in annual revenue, prompting them to explore new business models like their new blockchain, Arc.
Key Points
1. US interest rate cuts could reduce Circle’s annual gross revenue by up to $618 million and gross profit by $303 million.
2. Circle earns $2.54 billion annually from reserve income, heavily reliant on US Treasurys, making it vulnerable to rate cuts.
3. Circle introduced Arc, an EVM-compatible Layer-1 blockchain for stablecoin finance, aiming to create new fee-based revenue streams.
4. Tether holds $127 billion in US Treasury bills, making it the 18th-largest holder globally, with exposure growing by $7 billion since Q1 2025.
5. Arc will use USDC as its native gas token and aims to offer sub-second settlement, a stablecoin forex engine, and compliance features, with a public testnet expected in fall 2025.
Description
US interest rate cuts could slash Circle’s annual gross revenue by up to $618 million. The cuts, expected in September, would also slash gross profit by $303 million. Circle recently announced the debut of Arc, an EVM-compatible Layer-1 blockchain. Stablecoin giants Tether and Circle face a revenue challenge as upcoming US interest rate cuts threaten to reduce the substantial income they earn from interest-bearing US Treasurys. MartyParty, a crypto analyst on X, warned that when interest rates d...
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