A counterparty assessing a stablecoin issuer is underwriting something close to a cash manager that distributes through exchanges and apps. The token itself earns its issuer nothing. The money comes from the pool of cash and short-dated government securities behind it, and from how that income is split between the issuer, the exchanges and apps where balances sit, and, under most regimes now, nobody else. That split matters as much as the peg to anyone extending credit, setting a counterparty limit or accepting a stablecoin as collateral.
The reserve, not the token, is the business
Circle Internet Group reports as a US public company, so its filings show the mechanism in detail. In its Form 10-Q for the quarter ended 30 June 2026, Circle reported reserve income of $667.7 million for the quarter and $1.32 billion for the first half, against $634.3 million and $1.19 billion in the same periods of 2025. Reserve income is what the assets backing USDC earn. The filing says Circle's subsidiaries hold shares in the Circle Reserve Fund, a money market fund managed by BlackRock Advisors. Circle does not lend the reserve out. It collects the yield that Treasury bills and repo already pay, so the figure tracks short-term US rates far more closely than anything Circle does operationally, and a cycle of rate cuts reduces it directly (Source: Circle Internet Group, Form 10-Q for the quarter ended 30 June 2026).
Where a large share of it goes: distribution
Circle does not keep all of that income. The same 10-Q reports distribution and transaction costs of $410.4 million for the second quarter of 2026 and $815.8 million for the first half, up from $753.8 million in the first half of 2025. The first-half figure is about 62% of reserve income for the period. The largest recipient is Coinbase, under a Collaboration Agreement dated 18 August 2023. Circle's IPO filing described the split this way: Coinbase earns 100% of the reserve income on USDC held on its own platform and 50% of the residual income on USDC held elsewhere (Source: Coin Metrics, "State of the Network" issue 307, summarising Circle's S-1, 2025). Circle paid Coinbase $907.9 million in distribution fees in 2024 (Source: Lee Reiners, "Circle, Coinbase, and the Prohibition on Interest Under the GENIUS Act", CLS Blue Sky Blog, Columbia Law School, 11 December 2025). On 5 August 2026, the two companies said the partnership would renew automatically on the same terms (Source: Simply Wall St via Yahoo Finance, 5 August 2026).
Other distributors are paid out of the same pool. A Stablecoin Ecosystem Agreement dated 14 November 2024, which Circle filed with the SEC, relies on the Collaboration Agreement's definitions. It sets out the "Residual Portion", the share of the "Residual Payment Base" that an ecosystem participant is eligible to receive (Source: Circle Internet Group, Stablecoin Ecosystem Agreement, SEC exhibit, filed 2025). The commercial logic is simple. Distributors decide where balances sit, and issuers need those balances. The result is that a large part of an issuer's gross reserve income can be owed under contract before the issuer pays its own costs.
Tether: the same engine, a different buffer
Tether does not file with the SEC. It publishes quarterly attestation reports instead. Its report for the second quarter of 2026, announced on 31 July 2026 and prepared by BDO, showed net operating profit of about $1.5 billion for the quarter, driven mainly by US Treasury and repo income. It put total assets at about $187.8 billion and excess reserves, the amount by which assets exceed the tokens in issue, at about $4.11 billion. The same release said Tether's gold holdings had grown to more than 146 tons (Source: Tether, Q2 2026 attestation release, tether.io, 31 July 2026). Tether's core income is the same kind as Circle's: interest on a book of Treasuries and repo. The difference is that part of its buffer is held in assets with a market price, such as gold, and price moves in those assets can shrink or widen the excess over token liabilities.
An attestation confirms that stated assets covered stated liabilities on the report date, under the stated methodology. It says nothing about the buffer between report dates. We explain that limit in what proof of reserves actually proves.
Redemption and minting fees
Paxos says it charges zero fees to mint or redeem USDG and PYUSD, the stablecoins it issues, and that their reserves are held entirely in US dollar deposits, US Treasuries and cash equivalents (Source: Paxos, "Mint and Redeem", paxos.com, accessed September 2026). Any fees usually sit with intermediaries, such as an exchange or payment processor charging its own customers to move between cash and tokens. That fits the rest of the model. For an issuer whose income comes from reserves, a larger supply in circulation is worth more than a small toll on each mint or redemption.
What running the issuer costs
Circle's second-quarter 2026 operating expenses were $254.5 million: $134.0 million in compensation, $66.3 million in general and administrative costs, $29.9 million in depreciation and amortisation, $16.4 million in IT infrastructure and $8.7 million in marketing (Source: Circle Internet Group, Form 10-Q for the quarter ended 30 June 2026). In the same quarter, reserve income was $667.7 million and distribution costs were $410.4 million. Operating costs were therefore well below distribution costs. On these figures, interest rates and distribution contracts shape the issuer's economics more than its own running costs do.
Why the holder does not share it
The European Union already bans passing this income to holders, and the United States has enacted a ban that is not yet in force.
In the EU, Article 50 of the Markets in Crypto-Assets Regulation (EU) 2023/1114 says issuers of e-money tokens shall not grant interest in relation to those tokens. It applies the same ban to crypto-asset service providers in their services for e-money tokens. It defines interest as any remuneration or other benefit tied to how long a holder keeps the token, whether the issuer or a third party provides it. Titles III and IV of the regulation have applied since 30 June 2024, so this ban is in force (Source: Regulation (EU) 2023/1114, Articles 50 and 149).
In the US, Section 4(a)(11) of the GENIUS Act, Public Law 119-27, signed on 18 July 2025, bars permitted and foreign payment stablecoin issuers from paying a holder any form of interest or yield, in cash, tokens or other consideration, solely for holding, using or retaining the stablecoin. The Act takes effect on the earlier of 18 months after enactment, which is 18 January 2027, or 120 days after the federal regulators issue final implementing rules (Source: Public Law 119-27; Office of the Comptroller of the Currency, Bulletin 2026-3, 25 February 2026). Those rules are still at the proposal stage. The OCC published its proposal in February 2026, and the FDIC approved its own proposal in April 2026, with comments due by 9 June 2026. So the US ban is adopted law that is not yet in force. Its detailed compliance mechanics depend on rules that have not been finalised.
The usual reasoning is that a token paying interest starts to work like a bank deposit or a money market fund share, without the supervision, insurance or disclosure that comes with either. Our comparison of stablecoins, tokenised deposits and money market funds covers those differences.
An open question over what the US ban covers
It is not settled whether the US ban reaches distribution payments like Circle's to Coinbase. In the CLS Blue Sky Blog piece cited above, Lee Reiners, then described as a lecturing fellow at Duke University, argues that Coinbase, as custodian of its users' USDC, is the legal holder for the Act's purposes. On that view, payments calculated from reserve income and made because Coinbase holds USDC would be the kind of payment the statute bars. That is a legal argument, not a ruling. No regulator or court has decided the point, so anyone assuming today's distribution economics will survive after the Act takes effect is relying on an unresolved question.
What this means for a counterparty
This is not investment, legal, tax or accounting advice, and it takes no view on any token. For anyone assessing a stablecoin issuer as a counterparty, the disclosures above point to four things to check.
- Reserve income depends on interest rates. It falls as policy rates fall, and a report that does not show the maturity profile of the reserve hides that sensitivity.
- Distribution contracts can take a large share of gross reserve income, so the size of the reserve says little about the cash the issuer keeps. The useful question is how much is owed under contract, and to whom.
- An issuer whose buffer includes market-priced assets such as gold carries price risk that a buffer of Treasuries and cash does not, and a single attestation date shows that exposure only at that day's prices. Our institutional view of stablecoins sets out how those claims differ.
- The EU ban is in force, while the US ban will apply by 18 January 2027 at the latest and its reach over distribution payments is untested. A multi-year arrangement built on today's revenue shares carries that uncertainty.
Proof of Talk Paris 2026, at the Louvre Palace, featured two sessions in this area on the Hecto Main Stage: "Investment Opportunities in the Rise of Stablecoins" on 2 June, moderated by Amanda Cassatt, and "Where Stablecoins Meet Credit: Rewiring Finance Through Tokenisation" on 3 June, moderated by Michael del Castillo.