SEC’s Efforts for Transparency with Coinbase
In a significant development for the crypto sector, recent filings have uncovered years of efforts by the Securities and Exchange Commission (SEC) to enhance transparency between Coinbase and Circle, the issuer of the stablecoin USDC. Correspondence revealing the SEC’s inquiries from January to March 2025 surfaced on Tuesday, indicating a sustained interest in how Coinbase generates revenue linked to Circle’s stablecoin operations.
SEC Inquiries and Financial Reporting
The SEC particularly called for clarifications regarding how stablecoin revenue is derived, specifically relating to the distribution of USDC. In an official request, the SEC’s Division of Corporation Finance demanded explanations be included in Coinbase’s future financial disclosures, including details on the formula for determining revenue share from stablecoin operations. This scrutiny traces back to inquiries initiated under previous SEC chair Gary Gensler in October 2023 and extends to financial statements as early as 2022.
“As always, we remain focused on bringing the next billion onchain,”
— Paul Grewal, Coinbase’s Chief Legal Officer
Responding to Decrypt’s request for clarification, Grewal confirmed that the recent SEC requests had been fully addressed, with no need for restatements or modifications to prior earnings reports. He emphasized the company’s focus on growth.
Coinbase’s Revenue and Market Position
Despite providing audited financial reports consistently, Coinbase has historically kept a low profile regarding its financial ties to Circle, the organization managing USDC, which ranks as the second-largest stablecoin by market capitalization. The company is looking at an impending public offering. Notably, Coinbase reported earning $910 million in stablecoin revenue in 2024 — a 33% increase from the previous year, marking a peak performance as they aim to broaden their income base beyond standard transaction fees. Brian Armstrong, CEO of Coinbase, has expressed ambitions for the exchange to become the leading dollar-backed stablecoin provider, potentially outpacing Tether’s USDT.
Financial Dynamics with Circle
Recent disclosures from Circle, revealing the crypto exchange is entitled to half of the residual revenue from USDC reserves, highlighted the partnership’s dynamics. Circle reported generating $1.7 billion in revenue and reserve income in 2024, further illustrating the financial stakes involved. Additionally, Coinbase’s latest earnings report provides expansive insights into its revenue from USDC, which has become critical, especially during periods of dwindling trading volumes. Stablecoin revenues have outperformed traditional transaction revenues for the exchange in late 2023.
Changes in Governance and Future Regulations
Coinbase’s financial engagement with Circle was solidified in August 2023, when Coinbase acquired a minority stake in Circle, effectively ending the Centre Consortium’s governing body structure that both companies established in 2018. This renewed agreement outlined that increased circulation of USDC would amplify revenue under their partnership, with provisions for potential revenue-sharing with third parties based on USDC supply.
In the political arena, lawmakers are currently evaluating legislation that seeks to establish a legal framework for stablecoin issuers like Circle and Tether. Experts suggest that such regulations could pave the way for numerous new market entrants, fostering a competitive ecosystem for stablecoins in the financial landscape.
