Circle pays millions for Binance distribution while margins shrink

Circle has reinforced its relationship with Binance through a new five‑year commercial agreement and a $100 million equity investment. The deal comes as USDC balances on Binance have risen dramatically, but the cost of the partnership is putting pressure on Circle’s margins.

USDC growth on Binance

Customer USDC holdings on Binance grew from about $1.5 billion in early October 2024 to roughly $7.1 billion by early September 2025 – an increase of about 376 % and a rise from under 4 % to nearly 10 % of global USDC supply.

Financial terms of the partnership

Under the latest agreement, Binance purchased 1.237 million Circle Class A shares at $80.84 each, a 5 % discount to Circle’s closing price on September 17. The equity stake represents roughly 0.5 % of Circle. Circle continues to pay Binance an upfront fee of $60.25 million and monthly incentives tied to USDC balances, though the exact rate for the new contract has not been disclosed.

Impact on Circle’s margins

Circle reported $668 million of reserve income in Q2, while distribution and transaction costs amounted to $410 million (about 61 % of reserve income). Costs linked to Binance rose by $152.1 million in 2025. Analysts estimate that, given high‑double‑digit incentive rates, Circle may retain only $4 million‑$7 million of the gross $35 million annual reserve income generated by an additional $1 billion of USDC at a 3.5 % return.

Comparison with USDT

USDT balances on Binance also grew, but at a slower pace (about 51 %). The USDT‑to‑USDC ratio narrowed from roughly 14.3‑to‑1 in October 2024 to about 4.5‑to‑1 by September 2025, indicating USDC’s faster adoption on the platform.

Outlook

Analysts will monitor Binance’s USDC holdings and Circle’s non‑Coinbase distribution expenses in upcoming earnings reports to gauge the long‑term profitability of the partnership.