Circle drops millions on Binance distribution as margins slump

Circle is deepening its ties with Binance as customer balances for the USD Coin (USDC) stablecoin on the exchange have nearly quintupled since the companies initiated their partnership.

The two firms announced a five-year commercial agreement alongside a $100 million equity investment in Circle by Binance on Sept. 22. This deal extends an alliance that has established the world’s leading crypto exchange as a primary distribution avenue for USDC.

Aimed at broadening USDC adoption, particularly within emerging markets, the new pact supersedes prior agreements made in November 2024 and August 2025.

Under the terms, Binance acquired 1.237 million Circle Class A shares priced at $80.84 each—marking a 5% discount relative to Circle’s Sept. 17 closing price—and agreed to a two-year holding period during which it cannot sell, pledge, or hedge the stock. The commercial contract is set to run through September 2031, though provisions allow either entity to terminate the arrangement prematurely under specific conditions.

This extended collaboration follows a significant rise in USDC adoption on the platform. Data shows that users held approximately $1.5 billion in USDC on Oct. 1, 2024, just before the initial November agreement.

According to Binance’s Sept. 1 Proof-of-Reserves report, customer USDC holdings have climbed to roughly $7.1 billion, representing a surge of about 376%, or nearly a fivefold increase.

In contrast, the overall supply of USDC has expanded at a slower pace. Circle disclosed a circulating supply of $39.7 billion on Nov. 29, 2024, around the inception of the first Binance partnership. Current figures from DeFiLlama peg the circulating supply at approximately $74.4 billion, reflecting a growth rate of roughly 87%.

Consequently, Binance user balances have risen from under 4% of the global USDC supply at the outset of the collaboration to close to 10% today.

USDC closes part of Tether’s Binance lead

The growth of USDC on Binance has also outstripped the expansion of Tether on the exchange.

During the Oct. 1, 2024 reserve snapshot, Binance users held $21.4 billion in USDT compared to $1.5 billion in USDC, equating to roughly $14.30 of USDT for every single dollar of USDC.

By Sept. 1 of this year, USDT user balances climbed to $32.3 billion, while USDC reached about $7.1 billion, compressing the ratio to approximately 4.5-to-1. Over this timeframe, USDT customer balances grew by about 51%, trailing USDC’s roughly 376% leap.

Regulatory filings from Circle indicate this trend accelerated following the initial contract. USDC accounted for 5% of all stablecoins on Binance on July 1, 2024, expanding to 10% by Jan. 1, 2025, and reaching 22% by July 1, 2025.

These metrics demonstrate that Binance evolved into a far more prominent USDC distribution outlet throughout the partnership, even though Tether maintained its position as the leading dollar-pegged token on the platform.

Jeremy Allaire, CEO of Circle, noted that the latest pact is engineered to drive that distribution even further.

In a post on X, he stated:

“As the world’s largest and most widely used wallet for stablecoins and onchain finance, the partnership will accelerate global and emerging market preference and adoption of USDC. The internet financial system is expanding everywhere and this partnership will help to expand access to this new financial system to hundreds of millions of people and businesses around the world.”

Circle has paid heavily for that distribution

Achieving this scale on Binance has come at a substantial expense, casting the underlying financial mechanics of the renewed deal as a critical focal point.

Under the November 2024 accord, Circle provided Binance with an upfront fee of $60.25 million alongside monthly incentive payouts pegged to the volume of USDC maintained on the platform and within Binance’s treasury reserves.

These disbursements spanned from mid-double-digit to high-double-digit annualized percentages based on a fixed rate that reset quarterly at a discount relative to the three-month SOFR. Additionally, Binance committed to holding $3 billion of USDC in its treasury—subject to specific exceptions—with treasury-related incentives requiring a minimum balance of $1.5 billion.

Circle broadened the alliance once more in August 2025 concerning USDC managed through its Modular Smart Contract Wallet framework. That agreement established incentives equivalent to a high-double-digit percentage of a fixed rate tied to the three-month SOFR.

The newly minted five-year contract merges and supplants both prior frameworks, with Circle continuing to remit monthly incentives to Binance tied to USDC stored in the wallet. Specific figures regarding the new fee percentage or minimum balance requirements have not been made public.

Owen Lau and Nikhil Vijay, analysts at Clear Street, mentioned in a note distributed to CryptoSlate that the pact enhances visibility for Circle regarding one of its primary distribution pipelines outside of Coinbase, though the net financial impact remains ambiguous.

An incremental $1 billion of USDC yielding a 3.5% reserve return would generate approximately $35 million in gross yearly reserve revenue. Assuming Binance captures a high-double-digit share akin to previous terms, Clear Street calculates that Circle might net only about $4 million to $7 million.

This dynamic carries mounting significance for Circle’s profit margins. The firm posted approximately $668 million in reserve earnings during the second quarter while incurring roughly $410 million in distribution and transaction costs—amounting to roughly 61% of its reserve income. Expenses related to non-Coinbase distribution also climbed as operations scaled across current and new partnerships.

Binance already accounted for a major portion of those outlays. Circle reported that Binance-specific distribution expenditures increased by $152.1 million throughout 2025 as the collaboration expanded.

Binance becomes a shareholder

The updated agreement alters the dynamic by turning Binance into an equity holder of the issuer whose stablecoin it is compensated to distribute.

The $100 million equity injection grants Binance a stake in Circle while keeping the balance-dependent incentive framework intact. Clear Street likened this structure to Circle’s distributor-shareholder dynamic with Coinbase, though Binance’s stake of roughly 0.5% is considerably smaller.

Richard Teng, CEO of Binance, characterized the investment as a long-term endorsement of the stablecoin.

He remarked:

“Trust in this industry is earned through regulation, transparency, and delivery. Today, in recognition of all three, Binance commits $100M to Circle and extends our partnership for five years. This partnership is about bringing a stable, reliable digital dollar within reach of anyone with a phone.”

The viability of these strategic goals will be tested by future balances and associated costs. Clear Street indicated it will monitor reported Binance USDC holdings alongside Circle’s non-Coinbase distribution expenditures upon the release of third-quarter financial results.

With Binance users currently maintaining upwards of $7 billion in USDC, those forthcoming disclosures will likely illuminate the price Circle pays to sustain a distribution channel that has expanded from under 4% to nearly 10% of global USDC circulation in less than two years.