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May 11 (Reuters) - Circle on Monday reported higher quarterly revenue and reserve income driven by increased adoption and circulation of its stablecoin, sending its shares rising nearly 5% in trading before the bell.
Market volatility and the Middle East conflict pushed investors to rotate out of cryptocurrencies and into stablecoins to park capital earlier this year.
This was underscored by cryptocurrency exchange Coinbase's results last week, which reported dropping trading volumes. Coinbase has a strategic partnership with Circle.
The rollout of Europe's MiCA framework and the passing of the U.S. GENIUS Act steered users toward regulated digital assets, boosting the adoption of USDC, Circle's flagship stablecoin and the world's second-largest by market value after Tether.
The token is pegged to the U.S. dollar, backed by reserves of cash and other low-risk assets that tether its market price close to the benchmark of $1.
Circulation of USDC rose 28% from a year earlier to $77 billion at the end of the first quarter. Total revenue and reserve income grew 20% to $694 million.
Wall Street expects stablecoins to become one of the biggest themes within finance in the coming years and the next multi-trillion-dollar market opportunity.
Rate cuts late in 2025 also benefited the company, as Circle invests the cash backing its tokens in bank deposits and short-dated U.S. Treasuries, earning interest on those holdings. As a result, its income is highly sensitive to policy changes by the U.S. Federal Reserve.
CEO Jeremy Allaire had told Reuters that a further reduction in borrowing costs in 2026 would be "welcome" from Circle's business perspective.
The firm went public in a stellar debut on the New York Stock Exchange last year, paving the way for similar companies to test their luck in the public markets.
Circle's shares closed at $113.67 on Friday, up about 43% year to date and more than three times their IPO price of $31.
(Reporting by Pritam Biswas in Bengaluru; Editing by Pooja Desai)