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How do stablecoin issuers make money from reserve assets?
When customers receive newly issued stablecoins, the issuer holds reserve assets intended to support redemption under the token’s terms. Those assets may earn interest, such as on bank balances or securities, or dividends from a money-market fund. Circle’s SEC filing describes its income this way: it earns “interest and dividends on assets held in reserve accounts, which include cash balances held at banks and the Circle Reserve Fund, as applicable.” Circle SEC filing
The basic relationship is straightforward: if the reserve return stays the same, a larger amount of stablecoins in circulation generally means more reserve assets and more gross reserve income. If the return on those assets changes, income can change even if circulation does not. Circle describes both factors in its filing. Neither relationship alone reveals how much the issuer ultimately keeps.
What happens to the interest earned on the money backing a stablecoin?
The reserve return belongs to the issuer unless the token’s terms or a separate arrangement provide otherwise. A holder should not assume that owning a stablecoin entitles them to the interest earned on its backing assets. The issuer may use part of gross reserve income to pay distribution partners and cover costs; other business lines and expenses also affect its overall results.
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Distribution payments can be substantial
Circle reports distribution costs connected with its arrangements to incentivize distributors, including Coinbase. For the quarter ended June 30, 2026, Circle reported $324.6 million in distribution costs connected with Coinbase agreements. That is a company- and period-specific reported figure, not a standard stablecoin fee or a measure of Circle’s net profit. Circle SEC filing
Other revenue and expenses affect the result
Circle also reports subscription and services revenue, transaction-related revenue, redemption fees, blockchain rewards revenue and revenue related to platform infrastructure use, alongside transaction and other costs. These additional lines are specific to Circle’s disclosed business; they should not be assumed to apply to every stablecoin issuer. Circle SEC filing
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What assets can back a stablecoin?
There is no single reserve portfolio used by every issuer. Circle says its USDC and EURC reserves are highly liquid fiat reserves separated from Circle’s operating funds. Its transparency page lists cash deposits, U.S. Treasury securities and overnight reverse Treasury repurchase agreements. It says Treasury and repo holdings may be kept in custodial accounts, separately managed accounts or the Circle Reserve Fund, a money-market fund managed by BlackRock. Circle reserve transparency
Tether says its issued and circulating tokens are backed by reserves and may be redeemed subject to its terms. That statement does not make Tether’s reserve composition identical to Circle’s, or establish that every issuer uses the same mix of cash, securities, repos or funds. Check the issuer’s own current disclosures for its stated holdings and redemption terms. Tether issuer information document Tether terms
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How to compare issuers’ reserve economics
To understand how much an issuer may earn and what it discloses, compare more than the headline reserve balance:
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- Asset mix and liquidity: Look at disclosed cash, short-duration Treasuries, repos, money-market funds and any other holdings.
- Yield exposure: Consider both the amount of tokens in circulation and the reserve portfolio’s return. A reserve balance alone does not establish income.
- Distribution economics: Check whether the issuer identifies partners receiving allocations or other distribution costs, and how it describes those arrangements.
- Other income and costs: Review disclosed fees, platform or fund-management services, and operating or transaction expenses where available.
- Disclosure scope and cadence: Note the reporting date, frequency, assurance provider and whether a document is a reserve report, an attestation or a financial statement.
What reserve reports do—and do not—show
A reserve report is not automatically a full income statement or a financial-statement audit. Tether’s issuer information document says: “Reserves reports are not financial statements but selected financial information extracted from accounting records.” Tether issuer information document A reserve disclosure can help readers understand reported backing at a particular date, but it should not be treated as proof of the issuer’s net profit or as broader assurance than the document provides.
Disclosure schedules and scope also differ. Circle describes weekly reserve-holding disclosures and monthly third-party assurance on its transparency page. Tether describes quarterly reserve reports and says updates are not guaranteed at a particular interval. Compare the dates and stated scope of the documents, rather than treating reports from different issuers as equivalent. Circle reserve transparency Tether issuer information document Tether terms
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