Circle Internet Group (NYSE: CRCL) declined nearly 4% in early Wednesday trading after the company's second-quarter earnings delivered a mixed picture — profit topped Wall Street estimates while revenue came in below expectations.

Demand for stablecoins strengthened during the quarter as renewed conflict in the Middle East heightened volatility across cryptocurrency markets, prompting traders to reduce exposure to riskier digital assets and shift capital toward dollar-pegged instruments. Stablecoins such as USDC and Tether's USDT function as the primary medium for moving value across cryptocurrency exchanges and decentralized finance platforms, and their circulation is widely tracked as an indicator of liquidity conditions in digital-asset markets.

Circle posted $701 million in combined sales and reserve earnings for the three months ended June 30, representing a 7% year-over-year increase. Profit from continuing operations reached $48 million, a sharp turnaround from a loss-heavy comparable period in the prior year. According to the company's investor relations page, the results reflected both expanding USDC adoption and headwinds from declining interest yields on reserve assets.

The bulk of Circle's revenue stems from interest earned on the short-duration U.S. Treasury bills and cash holdings backing USDC, tying the company's income closely to the Federal Reserve's benchmark rate trajectory.

USDC Usage Expands While Lower Yields Temper Reserve Income

Outstanding USDC circulation stood at $73.3 billion at the end of June, up 19% year over year. Average quarterly circulation reached $76.5 billion, a 25% increase.

On-chain activity grew at a considerably faster pace. USDC processed $14.8 trillion in on-chain transfers during the quarter, surging 151% compared with the same period last year.

Circle earned $668 million from the reserve assets backing USDC, a 5% year-over-year increase. Growth was driven by a larger token supply in circulation, though softer interest returns limited the overall gain. The average yield on reserves declined 66 basis points to 3.5%.

Revenue from subscriptions, services, and other products reached $34 million, climbing 41%. Net revenue after distribution expenses totaled $289 million, up 15%, with the corresponding margin expanding 302 basis points to 41%.

Adjusted EBITDA margin came in at 50%, down 329 basis points. Profit from continuing operations represented 7% of total revenue and reserve earnings.

Circle incurred $412 million in distribution, transaction, and related costs, a 1% increase driven primarily by higher payments to distribution partners. Standard operating expenses fell 56% to $254 million, as one-time IPO-related compensation charges from the prior year no longer affected the comparison. On an adjusted basis, however, operating costs rose 23% to $146 million, reflecting increased investment in engineering, infrastructure, artificial intelligence systems, and forthcoming product lines.

The company held $12.4 billion in USDC directly on its own platform at quarter-end — more than double the amount from a year earlier. USDC stored on the platform represented an average 19.5% of total daily circulation, an increase of 1,204 basis points.

Users minted $83 billion in new USDC during the quarter, up 97%, while redemptions totaled $87 billion, up 113%.

As of June 30, USDC held a 27% share of the large, publicly attested dollar-backed stablecoin market, down 66 basis points from the prior year. Tether's USDT remains the largest stablecoin by circulation, with a supply exceeding $160 billion. The number of active on-chain wallets holding more than $10 in USDC grew 24% to 7 million.

Circle's payments network also saw increased institutional adoption. Based on the final 30 days of the quarter, the Circle Payments Network achieved an annualized transaction volume of $14.7 billion, a 76% increase from the previous quarter. Enrollment rose 29% to 175 financial institutions.

Circle Assembles Bank and Payment Partners Ahead of Arc Public Launch

Circle intends to open its Arc blockchain to the public on September 16. More than 100 companies and development teams are already building on the network.

Arc is designed to support private transaction capabilities, programmable finance tooling, autonomous software agents, and tokenization infrastructure for traditional financial assets.

Alongside the earnings release, Circle announced its first external validator group. Members include BlackRock (NYSE: BLK), Galaxy Digital (Nasdaq: GLXY), Global Payments (NYSE: GPN), Intercontinental Exchange (NYSE: ICE), Mastercard (NYSE: MA), SBI Holdings (TSE: 8473), Standard Chartered (LSE: STAN), Sumitomo Corporation (TSE: 8053), and Visa (NYSE: V). DTCC and MoneyGram will also participate as validators.

The validator lineup spans major banks, asset managers, exchanges, and payment networks, reflecting a broader trend in which regulated financial institutions have been building blockchain-based settlement and tokenization infrastructure.

Under this architecture, financial institutions utilizing the blockchain will contribute to its security and operation.

BlackRock, BNY Mellon (NYSE: BK), DTCC, and Standard Chartered are exploring potential Arc integrations. Their initiatives span tokenized securities, cryptocurrency custody, stablecoin access, foreign exchange trading, and repurchase agreements.

BlackRock intends to issue its BUIDL institutional liquidity fund on Arc. DTCC plans to enable firms to create blockchain-based representations of assets held through The Depository Trust Company.

BNY Mellon has added direct USDC minting and redemption capabilities to its digital-asset custody service. The bank already serves as custodian for the majority of assets backing the stablecoin.

Standard Chartered introduced a bank-operated system that allows institutional clients to convert traditional currency into USDC and redeem tokens through the same account arrangement.

Circle maintained its long-term projection for USDC circulation growth at a 40% compound annual growth rate. The company raised its 2026 forecast for non-reserve revenue from a prior range of $150 million to $170 million to a new range of $310 million to $330 million.

The expected margin after distribution costs was also lifted from 38%–40% to 41.7%–43.7%. Circle's full-year adjusted operating expense guidance remained unchanged at $570 million to $585 million.