Ladies and gentlemen, thank you for joining us. My name is Krista, and I will be your conference operator today. I would like to welcome you to the Circle Internet Group Third Quarter 2025 Earnings Conference Call. I will now hand the conference over to John Andrews, Vice President of Capital Markets and Investor Relations. John, the floor is yours.

Thank you, operator, and good morning. I'd like to welcome you to Circle's Third Quarter 2025 Earnings Call. I'm joined by Jeremy Allaire, our Co-Founder, Chief Executive Officer and Chairman, and Jeremy Fox-Geen, our Chief Financial Officer. Earlier this morning, we posted our earnings press release and earnings presentation on the Circle Investor Relations website, investor.circle.com. A transcript of this call will be posted on that website once available. I do need to remind everyone that our earnings press release, presentation and this call contain statements that are forward-looking. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Information concerning risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings. We will also disclose non-GAAP financial measures on this call today. Definitions of those non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures can be found in the earnings press release and earnings presentation, which are posted on Circle's Investor Relations website, investor.circle.com. Non-GAAP financial measures should be considered in addition to, not as a substitute for GAAP measures. Now, I'd like to turn the call over to Jeremy Allaire.

Thank you, John. I'm excited to talk with all of you today about our quarterly results and general outlook. But before I do, I want to talk about our broader vision for what is taking place in this market, a vision of an internet financial system that guides what we're building towards at Circle. Our vision from the beginning has been that a new set of open Internet infrastructure and open software infrastructure would collide with the global financial system and ultimately transform it. We are moving more and more towards that world and realizing that vision. What we are seeing emerge is the opportunity to build a full-stack Internet financial platform company with several platform layers. The first layer, blockchain networks are becoming foundational operating systems for economic activity on the Internet, what we call economic OSs for the Internet. These infrastructure layers will be part of migrating coordination, governance, value storage, financial contracts and other forms of economic intermediation into a software-powered and agentic economic system. This is an enormous platform and infrastructure opportunity that we believe is even larger than any past Internet platform technology. On top of these economic OSs is the second platform layer of digital assets. This includes stablecoins, Internet native digital assets based on protocols and applications and broader tokenization, including the tokenization of traditional assets and many other types of economic contracts. All of these digital assets will be built on the first layer of blockchain networks, the economic OSs for the Internet. This digital asset layer is fundamental to how economic value will be stored, transformed, transmitted and exchanged all around the world. On top of the blockchain and digital asset layers is the third layer, new application utilities that are built for the Internet economy, application utilities for payments, commerce, treasury management, capital formation, lending, governance and many other applications that are fundamental to economic activity. Full-stack Internet financial platforms are emerging, and Circle intends to be the leader in this space. With that backdrop, I want to discuss our latest results and our progress in expanding our platform and building towards the vision that I just described. In Q3, we saw very strong growth in our network. USDC in circulation grew 108% year-over-year to $73.7 billion. This is tremendous growth. And we're very proud that our growth also represents continued market share expansion. Moreover, the amount of onchain transactions using USDC grew 580% year-over-year to $9.6 trillion in Q3, underscoring the inherent and increasing velocity and efficiency of using USDC as a medium of exchange. This increasing velocity of money is a crucial feature of the Internet financial system. We had strong financial results in the third quarter. We realized $740 million in total revenue and reserve income, representing 66% year-on-year growth. Our adjusted EBITDA grew 78% year-on-year to $166 million, with a 57% adjusted EBITDA margin, a 737 basis point expansion. And we've delivered continued expansion in our platform. We launched Arc into public testnet in recent weeks with over 100 major participants. I'm going to talk more about that in a few minutes. We're also sharing today that we are exploring the possibility of launching a native token on the Arc Network, which we think could be an important component for driving utility, incentives, growth and governance of the Arc Network. We saw Circle Payments Network product expansion with multiple product releases and significant growth in transaction volumes, and we've continued to expand our stablecoin network across more chains with 5 new chain launches and 28 supported chains today, part of our deep commitment to maintaining a strongly market-neutral position. And adoption has been expanding across a range of use cases, industries and types of firms. Overall, the stablecoin market has continued to grow strongly, and Circle continues to gain share. On a year-over-year basis, stablecoins in circulation grew 59%. Because we grew faster than the overall market, Circle's share grew to 29% in the third quarter. Based on Visa's published analysis, stablecoin transaction volumes have grown approximately 130% year-over-year with USDC share expanding to 40% in Q3. And as you can see, the dollar stablecoin space remains a market with two leading issuers and a number of much smaller players as we continue to sustain our strong position despite increasing competition. At the heart of our competitive position are durable and powerful network effects that are anchored in several areas: the trust that we have enshrined in our infrastructure by being regulated, audited, public, transparent and compliant; the core liquidity infrastructure, our reserve infrastructure with systemically important banks and banking connectivity around the world providing at-scale minting and redemption. But also our broad distribution across blockchain networks and ecosystems, which has helped sustain the broader utility of our network. And we continue to innovate in product and technology and developer services which provides powerful infrastructure for application developers, financial infrastructure companies and others to build on. Crucially, we have been able to maintain our competitive position by being a market-neutral infrastructure that leading companies can build on top of. Our stablecoin network growth remains strong. As already noted, onchain transaction volume grew to $9.6 trillion in the quarter, up from $5.9 trillion in Q2. CCTP, our Cross-Chain Transfer Protocol is a key infrastructure in enabling capital-efficient and secure transfers of digital dollars across blockchain networks, applications and services. CCTP volume grew approximately 640% year-over-year to $31.3 billion in Q3. And in fact, over the quarter of all bridged volume of all assets from major bridge providers that we track, CCTP represented 47% of all of that traffic. In October, it was over 50%. This is really key as we think about the expanding role that Circle can play in providing infrastructure that supports broader cross-chain interoperability for digital assets. We're continuing to gain share in digital asset trading markets as well. It's a key priority for us. And you see this in our growing share of spot trading year-over-year and then the ongoing expansion of USDC within perpetual markets, in particular, on platforms such as Binance, the world's largest centralized exchange and Hyperliquid, the largest decentralized exchange. From June 30 to November 8, we've seen our tokenized money market fund, USYC, more than triple in size to approximately $1 billion, making it the second largest TMMF in the world. This is an important part of our growth in tokenized collateral for digital asset markets. And use case expansion and adoption is growing. We're seeing adoption in capital markets, in payments, in the digital assets ecosystem with banking infrastructure providers and to provide dollar access around the world, including with leading companies such as Brex, Deutsche Börse, Fireblocks, Finastra, Kraken and Itaú, the largest bank in Latin America. These are all key use cases with industry-leading companies that chose to work with Circle and which will be important to the ongoing growth and adoption of our stablecoin network. While USDC and Circle's broader stablecoin network are central to our business today, we are continuing to expand our platform across key dimensions. Coming back to this idea of building a full-stack Internet platform company, Circle has been methodically building infrastructure that goes down the stack into the core network operating system layer with Arc and moving up the stack into the application utility layer with CPN. With Arc, we've just delivered a critical and significant milestone in recent weeks with the launch of the Arc public testnet. When we think about this layer of infrastructure, we really look at it as an operating system layer, an economic OS for the Internet. Over prior decades, there have been fundamental platform shifts for how software infrastructure supported growth in the utility of the Internet, the web as an OS for information and data, the evolution into mobile as an organizing operating environment, cloud as an operating infrastructure and then other core utilities such as social, search and commerce, helping to organize ecosystems, platforms and activity. And now we're seeing two new major operating system paradigms, AI platforms and blockchain platforms. With Arc, we've created something that is enterprise-grade and purpose built to bring stablecoin finance and real-world economic activity on chain. Our public testnet launched with over 100 world-class companies spanning every major category of the financial industry, major payments firms, technology companies, fintechs and broad support across the digital asset markets industry. From Apollo to AWS, BlackRock, HSBC, Mastercard, Standard Chartered, Visa and so many other tremendous firms who are testing, evaluating and collaborating with Circle as we seek to bring Arc to commercial mainnet launch in 2026. We've also been activating Arc across our entire Circle product suite, making it seamless for developers and all participants in the ecosystem to take advantage of this new infrastructure from Circle as they prepare for Arc mainnet. Our vision for Arc is of a globally distributed network with infrastructure operators all around the world, in every region of the world, from every economic system in the world. And we envision strong stakeholder incentives and governance to help drive the adoption and evolution of this network. Consistent with that thinking, Circle is actively exploring the introduction of a native token on the Arc Network. This is an exciting development that we're actively looking at, and we'll share more as we continue our exploration. We are also seeing strong early momentum for Circle Payments Network, and we have expanded the CPN product portfolio. We launched CPN Console which brings self-service operations to CPN members for onboarding, integration and operating payment flows on behalf of their customers. This will streamline our ability to bring more members and more institutions onto the network. CPN Marketplace itself has continued to expand as I'll talk about momentarily. And we launched a new capability called CPN Payouts, which is purpose-built for automated stablecoin payouts on CPN. We've seen a number of financial institutions enrolled on the network grow to 29. We've also seen more and more institutions that are actively engaged in eligibility reviews to integrate to our network, including 55 financial institutions. And the overall pipeline of financial institutions seeking to join CPN has grown to 500. Across these participants are global systemically important banks, payment service providers, cross-border firms, neobanks, digital asset firms and many others. We've continued to expand the markets where CPN is available with live flows happening across Brazil, Canada, China, Hong Kong, India, Mexico, Nigeria and the United States. And we expect upcoming launches for flows into Colombia, the European Union, the Philippines, Singapore, the UAE and the United Kingdom to name a few. We've also been seeing strong early adoption with rapid growth in CPN's monthly total payment volume from our first full month only five months ago to November 7, we've seen over 100x growth in trailing 30-day payment volumes. As of last Friday, annualized transaction volume based on trailing 30 days is $3.4 billion. We're excited about this expansion of Circle's platform, continuing to build out what we believe can be one of the most significant and broadly adopted Internet financial platforms in the world. With that, I'm pleased to turn this over to Jeremy Fox-Geen for the financial review.

Thank you, Jeremy, and good morning, everyone. 2025 continues to be a year defined by growth, and I'm pleased to report we continued this momentum in the third quarter, delivering strong financial results. I'll start by briefly recapping the fundamentals of our business and financial model. Stablecoins are a network business and successful networks are enduring and valuable. Our strategy remains to grow and deepen our network. We earn reserve income on the assets backing our stablecoins, and we incentivize strategic partners to grow distribution and our network. Over the last year, we have expanded our revenue lines and now earn other revenue from certain of our transaction flows and network infrastructure. And as an Internet platform business, we have a highly scalable model with strong inherent operating leverage. Let me now review the quarter. USDC in circulation was $73.7 billion at quarter end, more than doubling year-on-year and growing faster than the overall market. USDC held within Circle's platform infrastructure grew nearly 14x year-on-year to $10.2 billion at quarter end, representing 14% of total circulation as increasingly, we are seeing leading institutions build upon our platform. Reserve return rate was 4.15% for the third quarter, down 96 basis points year-on-year, reflecting the decline in SOFR during this period. Total revenue and reserve income increased 66% year-on-year to $740 million for the quarter, as growth in USDC circulation was partly offset by that lower reserve return rate. Total distribution and transaction and other costs increased 74% year-on-year to $448 million. The increase was driven primarily by higher average USDC balances held on Coinbase's platform and other distribution incentives as we continue to build partnerships to drive growth and adoption. RLDC margin was 39.5% in the quarter, down 270 basis points year-on-year, but strengthening 133 basis points sequentially from the second quarter, reflecting the impact from growth with certain higher-margin products and partners. Other revenues, which are high margin and scalable, increased to $29 million from less than $1 million in the prior year, reflecting the new products and services launched since the second half of 2024. Subscription and services revenue was $23.6 million in the third quarter, primarily from revenue from our blockchain network partnerships. We added 5 new chains this quarter and 12 new chains this year. Transaction revenue was $4.7 million. Total revenue and reserve income less distribution transaction and other costs grew 55% year-over-year to $292 million. Adjusted operating expenses, which excludes depreciation and amortization, digital asset gains and losses and stock-based compensation grew 35% year-over-year to $131 million for the quarter, as we continue to invest in growing our platform and distribution at this pivotal time for our industry. Notably, this measure includes payroll taxes, which since our IPO also includes payroll taxes on stock-based compensation. These new payroll taxes on stock comp were $5 million in the third quarter. Adjusting for these new payroll taxes to make for a cleaner comparison, our underlying adjusted operating expenses grew 29% year-over-year. Adjusted EBITDA grew 78% year-over-year to $166 million, reflecting the strong operating leverage inherent in our model. Adjusted EBITDA margin expanded both year-over-year and sequentially to 57%. Let me conclude with a brief update on our outlook. We are at the beginning of meaningful shifts in the global markets for money, and we manage our business for long-term success. Moreover, several of our core performance drivers are visible to the market in real-time. As such, we do not give detailed quarterly or full financial guidance. We do, however, provide full year guidance on certain metrics to help our investors better understand our expected performance. We will update this guidance when we expect our performance to materially deviate from that guidance. Our USDC circulation outlook is long-term and through cycle and remains unchanged. We are increasing other revenue full year 2025 guidance to $90 million to $100 million as a result of strong subscription and services revenue in Q3 and underlying growth dynamics in transactions revenue. We expect RLDC margin to end the year around 38% at the high end of our range, reflecting strong on-platform performance. We are increasing our adjusted operating expenses for the year to $495 million to $510 million, reflecting growing investments in building our platform capabilities and global partnerships. This also reflects the impact from payroll taxes related to the potential future exercise of options by Circle employees. Overall, we've delivered a strong third quarter with meaningful growth and margin expansion. We're only just beginning to attack the opportunity before us and remain excited about our future. I want to thank the team here at Circle for your continued hard work and thank our investors and analysts for your support and engagement. With that, operator, we can now start the Q&A portion of the call.

Your first question comes from Pete Christiansen with Citi.

There are really great trends here, particularly with CPN, which is quite impressive. I want to focus on some of the CPN results. How should investors view the development of the pipeline? You have 55 new partners under review and a significant pipeline of 500. How should we consider the conversion into full users? Additionally, could you share how Circle plans to monetize CPN, whether directly or indirectly?

Yes, thanks for the question, Pete. This is Jeremy Allaire. We are very pleased with the progress of CPN. Since its launch in the spring, we have seen strong traction. First, we have been focused on ensuring that we have excellent products and operational capabilities that can support scaling membership and activations. We've made significant progress, which is reflected in our results and the other data points I mentioned. Our goal isn't solely about increasing the number of members on the network, although we do anticipate continued growth in that area. We are committed to adding markets, but not just for the sake of increasing numbers; we aim to bring in quality participants who have meaningful flows and the desire to benefit from a multilateral framework like ours, along with good connections to businesses, enterprises, and consumer retail. It's about quality over quantity. Additionally, when we discuss eligibility and eligibility reviews, we are evaluating several factors, including the strength of local liquidity in relation to banking systems and currencies as well as their ability to meet the network's service level agreements. We are focused on ensuring high-quality operational capabilities. Overall, we are very satisfied with the progress and the increase in both monthly transaction processing volume and the annualized transaction processing volume run rate that we have shared.

On monetization, just for the follow-up, I might add a couple of points. The first is to say we're focused now on growing the network. We're not focused on monetizing the network or extracting value. We want the network to grow so that it's creating value for all participants in an increasing way, and that's how networks grow and become valuable. Over time, there are many opportunities for very small fees, which benefit these new, more efficient Internet scale architectures. You want to charge much lower fees than traditional models and build businesses at much higher scale.

I would just quickly add that the members on their network can earn money. There are fees for users and businesses that utilize this network, as well as for the various currency flows that occur. I believe this is an attractive platform that enhances the products, services, and offerings of these members, allowing them to generate value, and we aim to scale that up. We are excited about integrating Arc into CPN and establishing new infrastructure that can support mainstream payment flows on the network.

Your next question comes from the line of Jeff Cantwell with Seaport Research.

I wanted to ask you about comments made by Chris Waller from the Fed at the Payments Innovation Conference in October. He mentioned that we are entering a new era for the Federal Reserve and payments, stating that the DeFi and crypto sectors are now more integrated into the financial system, with the Fed planning to actively participate in that evolution. What are your thoughts on this? Do you believe Circle has a role in this landscape as the Fed begins to examine crypto more closely?

Yes. Thanks for the question, Jeff. So we're 100% in alignment with Governor Waller. And today, Circle's infrastructure, whether it be our stablecoin network infrastructure, USDC itself, our cross-chain infrastructure are actually fundamental to this onchain and DeFi based financial system that's emerging. And in fact, we maintain a very strong leadership position in the DeFi based onchain world. And I think our competitive strength there has grown over time. I think the bigger idea, which I think Governor Waller is getting at is that the ability to kind of take what we think of as the building blocks of the financial system and move those into code and smart contracts and tokenized assets that run on the Internet is like a wholesale architecture shift, and it represents a major change in the actual underlying design of the global financial system from digital cash instruments like stablecoin money to financial contracts and financial market primitives, all expressed in code and that is at the very heart of the thesis of Circle. We keep talking about building the Internet financial system. We believe there is a large-scale change and there will be this large Internet financial system. We see it already sort of forming today. And Circle intends to be the leading Internet platform company for this new Internet financial system age. So I think it's very encouraging that the leaders of central banks, that the leaders of global institutions are seeing this as well and are affecting policy, but also technology and business practices that are really aimed in this direction.

Great. Appreciate that. And then a follow-up I had for you is you had 29% market share this quarter. Last quarter, you had 28%, so share stepping up there. Do you mind just talking more about where the share gains are materializing for you guys? I'm curious if you're seeing any notable change in the U.S. demand for USDC in particular, post the passing of the GENIUS Act and whether that clarity has been helping out in any way with the share gains you're seeing here.

I'm glad to address that. We experienced significant growth in Q3, driven by regulatory clarity as well as advancements in technology. This combination is fostering increased market activity, with major financial institutions, payment firms, neobanks, and large enterprises starting to incorporate stablecoin into their offerings. We highlighted several notable firms engaged during the quarter, which indicates we are benefiting from strong tailwinds. In various regions including the U.S., Europe, Asia, Hong Kong, and the UAE, stablecoin regulations are emerging, attracting mainstream players who prefer to collaborate with a firm like Circle that offers trust, transparency, liquidity, and compliance. We've consistently embraced this infrastructure approach as stablecoins gain traction, buoyed not only by regulations but also by the technological advantages that benefit Circle. The year-over-year market share growth, along with recent absolute growth, underscores this trend.

Your next question comes from the line of Joseph Vafi with Canaccord Genuity.

Congrats on all the terrific progress. I was wondering if we could kind of drill down a little bit on Arc here. Number one, Jeremy, I'm pretty excited in your exploration of a native token here. Can you just double-click on that, what you're looking at, what would be some of the reasons you would move forward with it versus not and implications both ways? And then I have a quick follow-up.

Yes, no problem. A couple of things. I think the first, and I mentioned this briefly in my comments as well, which is Arc Network is being designed and built in collaboration with a lot of major institutions. And you'll note, if you go and look at the actual Arc announcement, the range of financial infrastructure companies, global banks, firms in capital markets, asset issuers, asset managers but from all around the world, from Asia to the Middle East, to Europe, to the United States, to Latin America. And so one of the fundamental principles is we want a network that is distributed, that has operators from around the world, from different geographies and geoeconomic systems, and we want to create ways for those participants including the developers that build applications on Arc and the end users that are driving and growing the usage of Arc. We want to create stakeholder incentives, and we want to create governance methods for the evolution of the network. Now this is, I think, relatively common in the blockchain network space. But I think at this moment in time, when we're trying to bring together these mainstream companies and leading firms in the digital asset ecosystem as well, we really see the potential benefit of a native token for Arc that can provide utility for users of the network that can align incentives around the growth of the network, and that provides a concrete way for stakeholders to participate in governance around choices in terms of the technology and its upgrades, choices in terms of the expansion of the operators on the network as well. And so we're actively evaluating a token for Arc, and we'll share more about that as that comes together. But I think based on the Arc public testnet launch and the engagement we're seeing from developers already, we're really excited about this. We think it can be a critical infrastructure for Circle, but also a critical infrastructure for the entire global ecosystem that are trying to build mainstream scale applications on these networks and operating systems.

That's great. Really exciting. What does the intersection of CPN and Arc look like at this point or in the near future?

Yes. We have activated Arc as an infrastructure across all of Circle's products and services, now that it is in testnet. During this phase, we will ensure everything remains available. Recently, we announced that our tokenized money market fund product USYC is live on Arc testnet, and we aim to have a complete suite of services. Additionally, Arc Network is poised to provide low-cost, high-quality infrastructure for CPN, with settlement finality and excellent foreign exchange capabilities. Notably, many non-dollar currency issuers have launched on Arc testnet, including yen, real, peso, and Australian currencies, and we aim to increase the number of local currencies. Establishing a seamless, real-time, atomic currency exchange that members of CPN can use would be highly beneficial. Arc serves as a platform for stablecoin finance and enterprise-grade, regulatory-ready infrastructure for financial institutions, aligning well with CPN's ultimate goals. CPN is building on our stablecoin and digital asset network with USDC, EURC, and USYC, all of which can leverage our operating system with Arc.

Your next question comes from the line of Devin Ryan with Citizens.

A couple of follow-ups here. First, on the Circle Payments Network, obviously, great to see the momentum in the pipeline there up pretty materially from the last update. Just love to get a sense of kind of the catalyst to convert that pipeline kind of on the timeline. If you can give us anything there, what may close over the next quarter or two versus what is kind of more initial exploratory phase? And then anything on partnership economics? And then as you do scale the pipeline, do you have the capacity? Or should we expect to see some more costs come in?

I'll address the first part of your question and let Jeremy Fox-Geen handle the second part. Regarding the catalysts, establishing member-based payment networks often presents a classic chicken-and-egg scenario. It's crucial to ensure there are flows on both sides, so our focus has been on securing quality flows from originators in major markets to global destinations. We're beginning to see progress in that area, which is reflected in some of the metrics we've shared. More firms involved in money movement, particularly in cross-border transactions—whether they are banks, cross-border payment companies, or large enterprises managing money for creators or suppliers—are looking to capitalize on the speed and efficiency that stablecoin infrastructure offers. This is the catalyst we're observing, as established firms realize that optimizing their money movement processes can free up capital and reduce collateral needs, leading to greater capital efficiency and an improved user experience. These business motivations are significant for them. We're dedicated to ensuring high-quality participants across our network, as per Metcalfe's Law, every new node enhances the network's value. We want financial institutions joining us to quickly experience the benefits of this network. These are the business drivers for new members and the focus areas as we consider onboarding. Now, for insights on growth outlook, partnership models, and investments, I'll pass it on to Jeremy Fox-Geen.

Yes. Thanks, Jeremy. And first, just addressing the cost piece of your question. Obviously, as the network grows and accelerates its growth, so too are the costs inherent, for example, in onboarding those FIs through the risk and compliance reviews and ongoing monitoring and things like that. So yes, there will be more costs associated with that. It's kind of within our overall cost envelope. And as a technology company, obviously, we're building this in a very scalable infrastructure-driven way with sort of AI technologies built in wherever possible to ensure that as we scale and grow, we're not doing so by adding people; we're doing so in a very cost-effective, cost-efficient manner, which is very congruent to our sort of overall strong operating leverage inherent in every part of our model.

Excellent. And then as a follow-up, obviously, as you're having more conversations with potential partners and customers and those are scaling pretty materially here, are you learning anything about kind of on the demand side, anything that could influence kind of the product roadmap from here? And then kind of tied to that, there's been a lot of M&A headlines in the space right now. So just if you can touch on kind of M&A conversations or interest at the moment or even kind of what surprises you.

Yes, certainly. I think there are a few key themes to highlight. Companies looking to enhance their stablecoin payment systems require strong direct liquidity between stablecoins, the stablecoin network, and local markets. This focus on solid liquidity networks is critical for us. We are minting and redeeming at scale across major financial centers globally. We're also increasing the number of significant banks connected to our infrastructure in these key markets. This is about the efficiency and cost-effectiveness of moving capital through those channels, which sets us apart. We're building on this foundation with additional features like FX abstractions, settlement credit abstractions, and coordination capabilities. For many firms encountering this for the first time, our technology, like Arc, plays a crucial role. We have analyzed for years what traditional financial institutions need to simplify building and deploying applications on these networks securely and efficiently. For instance, Arc offers fast settlement finality with transaction costs around $0.01, with fees paid in USDC and other stablecoins over time. Confidentiality features are essential for users to make this work. We are witnessing a shift from early adopters, who tended to focus on speculation, to mainstream adoption where the infrastructure needs to align with broader requirements. We are focused on enhancing our entire product stack, not just CPN, to support mainstream institutions worldwide that aim to leverage this infrastructure.

Regarding the M&A aspect of your question, we view M&A as a means to enhance our core offerings. Our focus is on areas such as blockchain, digital assets, and applications, including the Circle Payments Network. So far this year, we have successfully closed three deals, and we plan to pursue more M&A opportunities to advance in these sectors. However, we do not intend to engage in M&A just for the sake of diversification.

One last comment is that we've been building infrastructure in this area for a very long time. There are other firms interested in this space that need to catch up, so you're seeing people trying to find teams, technology, and other resources. We've built everything we do historically in an organic manner. As Jeremy mentioned, we've acquired intellectual property and teams, and we will continue to explore opportunities as they arise. However, we feel very confident in our innovation curve and our ability to generate direct intellectual property. Recently, we noted that we generated 25 patents from the novel engineering and research and development of Circle.

Your next question comes from the line of John Todaro with Needham.

Congrats on the results here. I guess I have one and a follow-up. First, on the on-platform performance, I think we've been continuously pretty pleasantly surprised with the USDC on Circle platform here up to $10.2 billion. I'm just trying to frame this up. I would think most of this is for payments, cross-border money movement versus kind of crypto native. Any kind of maybe percentages or just framing that up and give us a little bit more color? Is that the right way to think about it that, that moves more towards some of the payment verticals versus some of the crypto-native stuff? And then I have a follow-up on Arc.

Sure. We don't specifically break down the usage on our platform by use case. However, what I can share is that for Circle, our focus has been on establishing partnerships with companies that aim to build their services on our technology stack, ideally utilizing our entire technology offering, including wallets, Circle Mint, core liquidity, and other developer services like CPN. We are particularly interested in partnering with growth-oriented firms that have a credible strategy for driving growth. The partnerships that have contributed to our growth on the platform align with this focus. To provide a bit more detail, some of these partnerships are with firms that have tens or hundreds of millions of users, often within financial super apps that provide wallets, payments, trading, investing, and more. While we don't have visibility into the specific behaviors of their users or the breakdown between peer-to-peer transfers and investments, our strategy is to pursue partnerships with platforms that have strong distribution and growth potential in their collaboration with us.

That's very helpful. Regarding Arc, you mentioned that the fees are paid in USDC and other stablecoins, and that the transaction fees are minimal. I can't envision the token being used for gas fees or anything similar. You presented it as potentially a governance token. Is that the correct perspective? Although it's still early, could you elaborate on the potential economic benefits or utility beyond the gas aspect?

Yes. So a couple of things. I think as I said earlier, we're looking broadly at utility, economic incentives, stakeholder participation and governance across the full ecosystem that will engage with Arc. And we are exploring a token for Arc Network that aligns with trying to accomplish all those things. But there's not a lot more I can say right now. Certainly, as we continue this exploration, we'll be able to share considerably more assuming that, that continues to go well.

Your next question comes from the line of Ken Suchoski with Autonomous Research.

I wanted to ask about the other revenue. I think subscription revenue stepped up nicely quarter-over-quarter. So how much of that is driven by adding the 5 new chains that you talked about versus some of the other recurring revenue sources. And then maybe on the transaction revenue within other revenue, I think that ticked down slightly quarter-over-quarter despite showing really strong growth across the various metrics. So maybe a little more detail on why the decline quarter-over-quarter?

Thank you for the question. There's a lot that goes on in this. So let me try and unpick some of the pieces. Yes, the sort of, as you said, strong growth in subscription and services revenue, primarily that is revenues from our blockchain network partnerships. As I think we said before, that revenue stream has two components that are upfront revenues from the various integrations that we do. And then there are ongoing revenues for maintaining those. Now the pace and progress of the upfront can depend upon a whole number of different factors. And so we've historically, and we'll do so again, describe that business as lumpy. And so we had a very strong quarter, and we had a long pipeline of fees, and we've been working very, very hard to execute upon those. And so the upfront fees is the largest part of that bucket, but we're seeing strong growth in the underlying recurring revenues within subscription services, which we're very happy about. You note the decline in transaction revenues rightly from $5.8 million last quarter to $4.7 million this quarter, and then you comment on the underlying growth of so many other things. There's a wide variety of elements within transaction revenues. And yes, we are seeing strong underlying growth in many of them. The decline quarter-on-quarter is best thought of as a spike in the prior quarter, a spike in redemption revenues associated with our USYC tokenized money market fund product. After we have made that acquisition, we repositioned that product to be used as collateral within the digital asset markets. And through that repositioning, we saw a very large amount of redemptions, leading to a spike in redemption fees in the second quarter which masks the underlying growth trends in the other products and services within that. Notably, USYC itself has returned to growth. It has grown at 200% from the end of last quarter to today and now stands as the second largest tokenized money fund product in the world.

Great. That's helpful, Jeremy. And then for my follow-up, I wanted to ask about the implied 4Q guide just because we're getting a few questions on it. For RLDC, I think there's some assumptions we all have to make there. But I think to reach the full-year guide that implies quite a bit of sequential step down in margins, maybe you could talk about what's driving the step down. We would have thought that the performance on Circle, on platform USDC and then some of the other revenue at a high margin that RLDC margins would actually improve over time. But maybe there's some dynamics in the market related to rewards and distribution costs. So any thoughts there? Any help there would be very helpful.

Thank you for the question. There are many factors at play that can complicate the situation. We are pleased to report strong sequential revenue growth from RLDC, especially considering the decline we've seen over the past few years. We've always maintained that networks benefit from network effects, which we are observing through the growth of our off-platform USDC and some of our economic agreements. There can be variability in those elements, which relates to our guidance. Our approach to guidance is to be clear and transparent based on our visibility. We tend to take a modestly conservative stance, not including every potential outcome or project we are currently working on, even though we have many initiatives in progress. We focus on what we are confident will be achieved and aim to meet or exceed those expectations.

Your next question comes from the line of Dan Dolev with Mizuho.

Overall, it was a really strong third quarter. Regarding the previous question, if we consider the optimistic scenario that the total addressable market is expanding, which could lead to price reductions, it appears you're indicating a downward guidance for fourth quarter income while other expenses are increasing. I haven’t heard a comprehensive explanation yet. My larger question would be how you would address the skeptics in the industry who argue that this is becoming somewhat commoditized. Even networks are mentioning that there will be many stablecoins. What would make USDC successful in this market in the long run? A brief question about your fourth quarter guidance, followed by a broader, more conceptual inquiry would be appreciated.

Thanks for the question, Dan. I'll start with the second part first. There seems to be a fundamental misunderstanding in the market. Many believe that any large company can introduce a stablecoin and it will be successful. However, history shows the opposite. We've seen major companies launch stablecoin products that ended up having little to no circulation. Even large players with extensive user bases have struggled to gain traction. The misconception is that stablecoin networks function like other Internet platform utilities, which rely on network effects. These effects come from the variety of products, services, and integrations with the network. If I’m creating a product that utilizes stablecoin payments, not supporting USDC puts me at a disadvantage due to its extensive global interoperability. We consistently observe significant B2B companies adding USDC as a payment option without any formal relationship with Circle, simply because it has the widest reach. The utility of the network and its reach work together to strengthen each other. Another point that isn't always recognized is that the success of digital currencies heavily depends on the liquidity available. We have dedicated years to building a well-integrated liquidity network for USDC, establishing primary liquidity with major global banking systems and secondary liquidity across brokerages, exchanges, and wallets. This liquidity also generates network effects—having confidence that a counterparty can be liquid enhances its utility. Additionally, there are important regulatory and structural advantages to consider. Ensuring proper integration and oversight with central banking systems is a significant challenge, and we have made substantial progress, holding over 55 licenses in various markets. This infrastructure and the associated risk management, along with the other network effects we've cultivated, are crucial and explain our consistent growth. We have seen increases in on-chain markets, total transaction volumes, and what Visa refers to as ‘real payment volumes,’ all while growing our market share amidst increasing competition. Looking ahead to the next few quarters, we anticipate considerable activity from those who believe they need to introduce a stablecoin. I encourage observers to assess the real trading liquidity of these tokens, the number of wallets associated with them, and their distribution. We believe we will continue to observe the current trends. This market operates on a winner-take-most basis, not winner-take-all. We're actively investing in critical platform developments that we believe are essential for succeeding in this sector. We're also seeing favorable commercial conditions globally due to technological advances and regulatory clarity. We want to capitalize on this opportunity to ensure we remain a leading player as the financial system evolves towards an Internet-based model.

Yes, thank you Jeremy. You hit on all the major points in there. Just one small follow-up on the piece about guidance. We are at the beginning of what can best really only be described as a megatrend, right? The growth and the building of the Internet financial system, bringing Internet capabilities and architectures into the world of money. And as you noted, Dan, right, the addressable markets here are huge. We don't give full-year or quarterly financial guidance other than on a few key metrics for that reason. Whenever you see an exponential growth curve and you zoom into the detail, particularly at the early end of that curve, you see a lot of fluctuations and variations. And we think that those shorter-term fluctuations are best described as missing the forest for the trees if one was to overly focus on them.

Your next question comes from the line of Andrew Jeffrey with William Blair.

This is Adib Choudhury on for Andrew. Building out some prior questions, it sounds like maybe you're somewhat agnostic to a specific base case around USDC and focus more on distribution. But if you have to pick, I guess, what's the most imminent use case beyond crypto trading in your view? And what's sort of the near-term visibility you have around USDC for non-crypto activity taking off?

Absolutely. Great question. We are not indifferent to the various use cases of USDC. We believe that stablecoin money is becoming a versatile form of currency utilized in a wide array of applications, ranging from small peer-to-peer payments to significant capital market transactions among major financial firms, and everything in between. We have observed increased acceptance from major consumer retail platforms like Stripe and Shopify, which are offering straightforward payment acceptance features. More specifically, regarding your question, I believe we are witnessing growth in cross-border and international payments using stablecoins, which has been a driving force for some time and continues to generate growth, leading us to establish a new pillar of our business with CPN. We are seeing mainstream flows opting for stablecoins as a more effective money movement system, which significantly influences our activities, growth, and global partnerships. Many of our partnerships are focused on this area, and we are even starting to see major banks enhancing their international money transfer processes. Additionally, large enterprises are exploring better internal treasury management strategies for moving money across different regions and handling collections and disbursements in global markets. We have also discussed the digital dollar as a store of value, and there is still demand from both businesses and households for holding USDC. Looking back at the GENIUS Act, one of its key intentions, advocated by Secretary Bessent and others, is to enhance the global reach of the dollar. We are definitely seeing progress on that front. Furthermore, traditional financial markets are beginning to adopt stablecoins, with clearing houses and derivatives exchanges looking to utilize stablecoins for collateral and settlement as an advancement over traditional banking methods. We have announced partnerships with organizations like the Intercontinental Exchange and Deutsche Börse Group in this regard. Additionally, numerous traditional financial institutions are developing smart contracts and digital tokens, where USDC often serves as the primary cash and settlement leg. For instance, firms like Zero Hash collaborate with us and engage with many tokenized issuers to promote the use of USDC. While our approach is diverse, we are certainly not indifferent; we are actively engaging in areas with clear product-market fit and market demand for this infrastructure. The GENIUS Act has played a crucial role in encouraging major institutions to adopt and utilize this technology, which is also influencing regulators worldwide to ensure well-regulated products like USDC can function in their markets, thereby driving institutional access and demand in various global regions.

Your next question comes from the line of James Yaro with Goldman Sachs.

I wanted to follow up on the previous question. Could you provide a quantitative sense of how much USDC is being utilized in payment and capital markets use cases outside of crypto trading and DeFi? Is there any way to quantify its usage compared to the IPO, or is it all included in the competition?

So there is certainly growth happening in these cross-border use cases. And in fact, I think there's some good third-party reporting on this. There's a third-party analyst firm Artemis which has recently published, I think, some of the best data on growth in business-to-business payments, international business-to-business payments and the growth through these periods, I think I don't know what the ending period. The ending period is pretty recent, is very strong. I think it's reflective of what we're seeing in the partnerships that we're forming in the cross-border related payment space. We don't break it out, but there are, I think, very good third parties who are looking across the entire ecosystem, not just Circle to size that growth and activation.

Your next question comes from the line of Kenneth Worthington with JPMorgan.

So you've announced a series of arrangements with high-profile financial institutions to utilize USDC, and I guess the fact that they're choosing USDC shows the power of your brand. What are you seeing in terms of the economics that they're asking of you? Are these new partners sort of getting full fare? Or are you seeing the power of the network, allowing you to negotiate better economics for you in these arrangements than maybe what you had seen in the earlier arrangements?

Yes, that's a great question, and it ties back to something I mentioned earlier about our strong global utility that many feel they cannot afford to overlook or integrate with. For anyone creating a product that aims for interoperability, supporting USDC is crucial. If you want to create a product that facilitates the easy transfer of value, the liquidity of USDC is vital. We certainly have strong network effects. When considering partnerships, as I previously stated, our primary focus is on investing in growth incentives with partners who can expand our distribution. Simply adding USDC support to a product or service is not enough to generate any economic benefits for us. We need to see a genuine and mutually beneficial path where partners are committed to our platform and network, actively promoting and driving measurable growth. Only when that is evident will we consider implementing economic incentives. It’s important for us to establish win-win partnerships that create value and drive growth for both parties. We recognize that our network and capabilities are essential for most products available today. Although we are actively working to build these mutually beneficial partnerships, many prominent brands supporting USDC do not have direct economic incentives. They choose us because we are recognized as the most trusted, transparent, compliant, and globally available option.

Ladies and gentlemen, that does conclude our question-and-answer session. I will now turn the conference back over to John Andrews for closing comments.

Great. Thank you, everyone, for taking the time to listen to us this morning. Obviously, the IR team here at Circle is standing by to engage with you in any follow-ups, and we wish you all a good day.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.