Rate Cuts Threaten Profits of Stablecoin Giants Tether and Circle

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.