Circle fires 5% of staff despite higher profits

Circle, the US company behind the popular stablecoin USDC, laid off about five percent of its staff in the third quarter. It is striking that the intervention takes place while both turnover and profit increase.

Nevertheless, the quarterly figures also show a less positive picture: Circle's main source of income is under pressure.

The reorganization cost Circle approximately $9.1 million, primarily in severance payments. The company wants to better align its workforce with the strategy and activities it wants to focus on in the coming years.

Meanwhile, net profit increased by five percent to $226 million. Total revenues also increased, by seventeen percent to $865 million.

But behind that growth lies an important caveat. Circle earned $182 million from the presale of ARC, the cryptocurrency that belongs to its new blockchain arc.

That one-off revenue gave the quarterly figures a considerable boost. Without this income, it becomes clearer that Circle earns less from its most important business activity.

Circle earns most of its money from the interest on the reserves that support the value of USDC. This money is invested, among other things, in US government bonds.

It is precisely this interest income that is under pressure. In the third quarter, they fell from about $711 million to $658 million, a decrease of more than seven percent.

The main cause is the lower interest rate. The average return on reserves fell to 3.5 percent. As a result, Circle earns less from the money against the USDC spent.

At the same time, USDC is barely growing. The total volume in circulation remained virtually unchanged at 73.9 billion dollars, while the market share declined to 27 percent.

That makes Circle vulnerable. If interest rates fall further and there is no significant more USDC in circulation, the income from the reserves may come under further pressure.

That's why the company is trying to build new revenue streams. Circle is expanding its payment network and has announced the acquisition of payment company Tazapay.

Via that network, 41.3 billion dollars of payments are now processed on an annual basis. With this, Circle wants to become less dependent on interest income and focus more on international payments.

Despite USDC's stagnant growth, the company remains ambitious. Circle is sticking to its goal of growing the amount of USDC in circulation by an average of forty percent per year in the coming years.