Circle Internet Group, Inc.

Current report

Our business and Class A common stock are subject to many risks, as more fully described in the “Risk Factors” section of our Annual Report on Form 10-K filed with the SEC on March 9, 2026. Except as set forth below, there have been no material changes to the principal risks that we believe are material to our business, results of operations, and financial condition from those disclosed in Part I, Item 1A—“Risk Factors” of the 2025 Annual Report on Form 10-K filed with the SEC on March 9, 2026. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

Current report

Risks Related to Arc and ARC Tokens

Current report

The market for blockchain infrastructure is highly competitive, and Arc may fail to achieve sufficient adoption to support a viable ecosystem.

Current report

The market for blockchain infrastructure is intensely competitive. We anticipate that Arc will compete with numerous established and emerging blockchain networks, many of which already have significantly larger developer communities, user bases, and ecosystem resources than Arc would have at the outset. Competing networks may develop superior technology, attract more developers, or offer more favorable economic terms to users and network participants, such as validators. New blockchain networks may also emerge that are better positioned to capture market share.

Current report

There can be no assurance that we will launch Arc on our contemplated timeline or that Arc will achieve the adoption necessary to sustain a robust ecosystem. Failure to attract a critical mass of developers, users, and/or applications could limit demand for block space and/or reduce the utility and value of our ARC Token holdings. The rapidly evolving nature of the industry means that competitive dynamics can shift quickly and unpredictably.

Current report

Moreover, although we have entered into token purchase agreements with certain institutional investors in connection with a presale of ARC Tokens, there can be no assurance that the ARC Token will ultimately be launched. The launch of the ARC Token remains subject to numerous contingencies, including continued technical development of Arc, any transition of the Arc network to a Proof-of-Stake or delegated Proof-of-Stake consensus mechanism, market conditions, business considerations, and legal, regulatory, and compliance assessments. We may determine not to proceed with the launch of the ARC Token, or to delay any such launch for an extended period of time, for any number of reasons. If we do not launch the ARC Token, or if the launch is materially delayed, we could face reputational harm, disputes with presale purchasers, and/or increased regulatory or litigation risk, and our business, financial condition, and results of operations could be adversely affected.

Current report

Arc may be subject to technical risks, including software vulnerabilities, bugs, and failures that could result in loss of assets or network downtime.

Current report

Arc, as a layer-1 blockchain network, is complex software that may contain errors, vulnerabilities, or defects that we have not detected. Blockchain protocols are a novel technology, and even extensive security audits may fail to identify all vulnerabilities in the codebase. Exploits of software vulnerabilities or other successful attacks could result in loss or theft of assets held on the network, reputational harm, legal liability, and loss of user confidence. In particular, because the security of Arc will rely on cryptographic algorithms and hash functions, advances in computing technology, including in particular the development of quantum computing and artificial intelligence, could render Arc vulnerable to attack. A sudden or unexpected rapid development in the area of quantum computing or artificial intelligence could expose Arc and its users to significant risks. Any attack on Arc could result in theft of assets, manipulation of transaction records and/or loss of user confidence. We may be required to implement emergency protocol upgrades or hard forks to address vulnerabilities, which may themselves introduce new risks, cause network disruptions, or damage our reputation. Bugs or defects in smart contracts deployed on Arc by us or third parties could also expose users to losses, and we may face reputational harm or legal liability even for vulnerabilities that originate in third-party code. Network outages or extended periods of reduced performance could harm user adoption, damage our reputation, and reduce the utility and value of the ARC Token.

Current report

Arc’s protocol may require upgrades over time to address vulnerabilities, improve performance, implement new features, or respond to regulatory requirements. Protocol upgrades, particularly those requiring a hard fork, carry significant execution risk. Hard forks can result in chain splits, creating competing versions of the network that fragment liquidity and user activity. Even soft forks and backward-compatible upgrades can cause instability if not adopted broadly by validators and node operators. In the event of significant disagreements within the validator community or the ARC Token holder base regarding proposed protocol changes, we may face governance disputes that are difficult to resolve and that damage the cohesion and credibility of our ecosystem. We may also face pressure from third parties, including large ARC Token holders or ecosystem participants, to implement protocol changes that are not in the best interests of us or our stockholders.

Current report

Furthermore, the insurance market for blockchain-related businesses remains limited and immature. We may be unable to obtain insurance coverage that adequately protects us against the risks associated with Arc operations, including losses from cybersecurity incidents, smart contract vulnerabilities, theft of digital assets, or regulatory enforcement actions. Even where insurance coverage is available, it may be subject to significant exclusions, deductibles, or limitations that reduce its practical utility. In the event of a material loss not covered by insurance, we could suffer significant financial harm.

Current report

Arc may be used to facilitate fraud, scams, sanctions violations, or other illicit or improper activity, which could subject us to liability, regulatory scrutiny, and reputational harm.

Current report

Public blockchain networks and digital assets have in the past, and may continue to be, attractive targets for bad actors seeking to engage in fraud, money laundering, sanctions evasion, theft, market manipulation, scams, or other illicit or improper activity. Arc may host third-party applications, tokens, or other activity that we do not control and that may be used in unlawful, deceptive, or harmful ways. If Arc and/or ARC Tokens are used to facilitate such activity, we may face user complaints, litigation, regulatory investigations, enforcement actions, reputational harm, and increased compliance and monitoring costs.

Current report

In addition, privacy-enhancing or similar features may increase the difficulty of monitoring transactions and enforcing legal or compliance controls. Although we expect to implement and refine policies, controls, tooling, and governance mechanisms intended to address misuse of Arc and ARC Tokens, there can be no assurance that those measures will be effective or that regulators will view them as sufficient. Any such measures, including sanctions-screening, deny-list, or similar controls, may be difficult to design and administer effectively, may increase perceptions of centralization or censorship, and may adversely affect network utility or user adoption.

Current report

A determination that the ARC Token is a “security” or that an activity in which we engage with respect to the ARC Token involves a “securities transaction” for purposes of the securities laws could adversely affect the value of the ARC Token and/or have adverse regulatory consequences for us.

Current report

We have taken the position that the ARC Token is not a “security,” and that transactions in the ARC Token, except for the presale transactions closed on May 8, 2026, are not “securities transactions,” as defined under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This determination is based on our analysis of existing case law, regulatory guidance and the structural characteristics of the ARC Token, including its utility functions and the degree to which its value is expected to depend on factors other than our managerial efforts, or those of our affiliates (including our subsidiary that is expected to act as the issuer of the Arc Token, or other identifiable third parties. We believe that our process reflects a thoughtful analysis that is reasonably designed to facilitate the application of available legal guidance to the ARC Token and transactions in the ARC Token to determine whether it is a security or, they are securities transactions, respectively, under the federal securities laws. However, this position is not free from doubt, and there can be no assurance that the SEC or a court of competent jurisdiction would agree with our characterization. In addition, even if the ARC Token itself were not characterized as a security, one or more offers, sales, distributions, staking arrangements, governance arrangements, treasury activities, or other transactions involving the ARC Token could be characterized as securities transactions or otherwise give rise to securities law obligations.

Current report

The SEC and its staff have previously taken the position that a range of digital assets, transactions in digital assets, products, and services fall within the definition of a “security” under the U.S. federal securities laws. Despite the SEC being the principal federal securities law regulator in the United States, whether or not an asset, product, or service is a security or constitutes the offer or sale of a security under federal securities laws is ultimately determined by a federal court. The legal test for determining whether any given digital asset, product, or service is an “investment contract” was set forth in the 1946 Supreme Court case SEC v. W.J. Howey Co. and whether any given digital asset, product, or service is a “note” in the 1990 Supreme Court case Reves v. Ernst & Young. The legal tests for determining whether any given digital asset, product, or service is a security or constitutes the offer or sale of a security require a highly complex, fact-driven analysis. Accordingly, whether offers or sales of the ARC Token would ultimately be deemed by a federal court to be securities transactions, or the ARC Token deemed to be a security, is uncertain and difficult to predict notwithstanding the conclusions of the SEC or any conclusions we may draw based on our assessment regarding the likelihood that the ARC Token could be deemed a “security” or that offers or sales of the ARC Token could be deemed securities transactions under applicable laws. Any enforcement action by the SEC or another regulatory authority asserting that a digital asset is a security or sold in a securities transaction, or a court decision to that effect, would be expected to have an immediate material adverse impact on the trading value of that digital asset, and depending on the specific characteristics of the digital asset, could have adverse spillover effects on the trading values of other digital assets perceived to share similar characteristics. The classification of a digital asset or transactions in that digital asset as a security or securities transaction under the federal securities laws has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, clearing and holding of such assets, and any such classification with respect to the ARC Token would have adverse consequences to our business, financial condition and results of operations.

Current report

While the above description of adverse regulatory consequences focuses on the federal securities laws, state regulators and jurisdictions outside the United States retain independent authority to enforce their own securities laws, which may differ from or be interpreted more expansively than federal law. As a result, a state regulator or foreign jurisdiction could determine that the ARC Token constitutes a security under applicable law, even if the SEC has elected not to pursue enforcement action, the SEC has provided informal guidance or assurances to the contrary, or the ARC Token is otherwise excluded from the definition of a security at the federal level. Moreover, private litigants may assert claims under federal or state securities laws based on similar theories, regardless of the positions taken by federal regulators.

Current report

We intend to distribute ARC Tokens through multiple channels, which could result in exposure to liability or other adverse consequences.

Current report

We intend to distribute ARC Tokens through multiple channels, which may include, among others, token sales and presales, developer grants, network growth programs and other participation mechanisms. Each of these potential distribution methods could involve complex and potentially unsettled questions carrying distinct legal risks and uncertainties, and there can be no assurance that all such distribution activities will be found to comply with applicable law. Adverse determinations with respect to one or more of them could result in exposure to material liability or otherwise adversely affect our business.

Current report

In particular, we have conducted a presale of ARC Tokens to institutional investors. While we have taken the position that ARC Tokens are not securities, we treated the offer and sale of the ARC Tokens pursuant to the token purchase agreements as transactions involving investment contracts and conducted the transaction pursuant to an exemption from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2) thereof and Rule 506(b) of Regulation D promulgated thereunder. There can be no assurance that such exemptions will be available or that our conduct of the presale will satisfy all of the conditions required therefor. If the presale is deemed a non-exempt offer or sale of securities, we may be subject to rescission claims from purchasers, which would require the issuer to refund the consideration received plus interest, in addition to potential civil and criminal liability under the securities laws. Even if we believe the presale qualifies for an applicable exemption, the SEC or other regulatory authorities may disagree. Any enforcement action or adverse determination with respect to the presale could result in exposure to material liability or otherwise adversely affect our business.

Current report

Further, we have allocated or intend to allocate a portion of the ARC Token supply to strategic counterparties, including ecosystem developers, prospective validators and other participants, in connection with services to be rendered or partnerships to be formed. The SEC or other regulators may characterize these allocations as compensatory arrangements that constitute sales of securities, or as part of a broader integrated distribution plan subject to registration requirements. If such characterizations were to prevail, we could face liability for failure to register the allocation as a sale to comply with applicable exemptions, and strategic counterparties who received ARC Token allocations could seek rescission of those arrangements.

Current report

The market price of ARC Tokens could be highly volatile and may decline significantly, which could impact our business and financial condition given our anticipated ARC Token holdings. In addition, future sales or distributions of ARC Tokens by us or other large holders could depress the price of ARC Tokens.

Current report

We expect to hold a material number of ARC Tokens on our consolidated balance sheet, including both our long-term

Current report

holdings and tokens held in treasury with the intention of benefiting the Arc community for ecosystem or reserve purposes. The trading price of ARC Tokens, to the extent a liquid market develops, may be highly volatile and subject to wide fluctuations. The price of ARC Tokens may be influenced by a variety of factors that are beyond our control, including speculative trading activity, demand (or lack thereof) for use of Arc, regulatory developments or enforcement actions, macroeconomic conditions, technological developments relating to competing blockchains, changes in the total supply of ARC Tokens, changes in market sentiment and/or the actions of large ARC Token holders or other Arc ecosystem participants.

Current report

Digital asset markets have historically experienced periods of extreme volatility and are susceptible to market manipulation. There can be no assurance that a liquid trading market for the ARC Token will develop or be sustained. If the ARC Token declines significantly in value or becomes illiquid, our business model, to the extent it depends on the ARC Token, could be materially harmed.

Current report

Because of our anticipated ownership of a material portion of the total ARC Token supply, sales or other dispositions of ARC Tokens by us, or other distributions from the ARC Token treasury that we hold, could increase the supply of ARC Tokens available in the market and exert downward pressure on the price of ARC Tokens. Similarly, the vesting and release of ARC Tokens allocated to presale purchasers and strategic counterparties could result in significant market selling pressure. There can be no assurance that the market will be able to absorb such sales without a material decline in the price of ARC Tokens. A sustained decline in ARC Token prices could impair the utility and adoption of our network, reduce the value of our ARC Token holdings and harm our business.

Current report

Arc and ARC Token may expose us to additional regulatory risks.

Current report

The legal and regulatory status of digital assets, including the ARC Token, varies significantly across jurisdictions and continues to evolve rapidly. In many countries, the issuance, distribution, trading and use of digital assets are subject to licensing, registration or authorization requirements, or have been partially or wholly restricted or prohibited. We may not be in compliance with, or may be unable to comply with, the applicable laws and regulations of every jurisdiction in which the ARC Token is or may be held, traded or used, particularly as such laws continue to develop and as Arc grows. For example, in certain jurisdictions, digital assets may be subject to financial services regulation, anti-money laundering requirements, state money transmission or virtual currency business requirements, and other obligations that could restrict the permissible uses of the ARC Token or impose substantial compliance costs, or may implicate other regulatory regimes such as the Investment Company Act of 1940, as amended. Regulators, including the Financial Crimes Enforcement Network (“FinCEN”), the Office of Foreign Assets Control (“OFAC”), state regulators, and foreign equivalents, may view certain activities on Arc or related protocols as creating regulatory obligations for us. Further, we cannot predict how legislative and regulatory developments will affect Arc. New or amended laws or regulations, or developments in the interpretation or application of existing laws and regulations, such as those currently being considered in the United States by Congress, could require us to obtain licenses or registrations that may be difficult or impossible to obtain, such as under the Investment Company Act of 1940, restrict or prohibit certain uses of ARC Tokens or Arc, or impose compliance obligations relating to know-your-customer and AML requirements, or adversely affect features such as privacy, interoperability, or stablecoin-based fee mechanics. Our failure to comply with applicable laws and regulations could result in enforcement actions, fines, penalties, restrictions on our operations, or reputational harm in those markets.

Current report

We will have significant influence over Arc governance decisions and such decisions may be perceived to favor ARC Token holders in ways that conflict with, or are not in the best interests of, our stockholders.

Current report

Over time, we anticipate that Arc will transition from a Proof-of-Authority (“PoA”) consensus model to a Proof-of-Stake (“PoS”) or delegated Proof-of-Stake (“dPoS”) consensus mechanism. However, for so long as Arc remains a PoA consensus mechanism in which we retain control of the network’s consensus mechanism, we will have significant influence over governance decisions, including decisions regarding network upgrades, fee structures, validator selection, token economics and protocol parameters. Even after a potential transition to a PoS or dPoS consensus mechanism, we expect to retain control over certain decisions, such as validator selection or network upgrades, and may also control or influence certain other decisions, such as token economics, through our ownership of ARC Tokens or validator operations. Accordingly, there is a risk that decisions we make and/or influence via our control may not be perceived to be in the best interests of our stockholders.

Current report

In addition, because we will hold a significant number of ARC Tokens, we will have a direct financial interest in the success of Arc and the ARC Tokens. This interest may influence our business decisions and affect how we prioritize Arc relative to other corporate objectives, and may create conflicts of interest with respect to decisions affecting the ARC Token or Arc. For example, we may be incentivized to make governance decisions, allocate resources, or pursue strategic partnerships related to Arc at the expense of other business priorities. Our stockholders, who participate in the equity value of Circle but not directly in Arc or the ARC Token (except to the extent of our ARC Token holdings), may have different views about how these trade-offs should be managed. Our Board of Directors and management will need to exercise careful judgment in navigating these conflicts, and there can be no assurance that they will always do so to the satisfaction of our stockholders.

Current report

These conflicts of interest may be difficult to manage and may give rise to stockholder claims or regulatory scrutiny. Our directors and officers have fiduciary duties to our stockholders under applicable corporate law, and those duties may at times be perceived to conflict with actions that we take in our role as the initial creator and steward of Arc. There can be no assurance that our stockholders will agree that we are managing these conflicts effectively, which could subject us to litigation, regulatory action, or reputational harm. Our stockholders may also disagree with governance decisions we make with respect to Arc, which could harm our stock price and negatively affect our relationship with investors.

Current report

The planned transition of certain decisions relating to Arc to a distributed governance model may not occur on the timeline we anticipate or at all, and may create risks during or after the transition period.

Current report

We intend for governance of certain decisions relating to Arc to progressively transition to a distributed model in which ARC Token holders, Arc validators, and a security council exercise meaningful control over protocol decisions. However, this transition involves significant technical, legal, and operational challenges. The pace and extent of decentralization will depend on factors including the development of appropriate governance infrastructure, the diversity and engagement of the ARC Token holder community, regulatory developments and our own strategic decisions. There can be no assurance that such decentralization will occur on the timeline we anticipate or at all.

Current report

During the transition period, we will retain substantial control over Arc and bear the attendant legal and regulatory risks of that control. In particular, because we may act, directly or indirectly, as a developer, steward, validator operator, ARC Token holder, governance participant, security council participant, service provider, and/or other influential participant with respect to Arc or decentralized finance protocols deployed on or integrated with Arc or other blockchain networks, private plaintiffs, regulators, or other parties may assert that we had the practical ability, contractual authority, or governance influence to prevent, limit, remediate, or respond to harmful activity, and therefore should bear liability for losses or other harms arising from such activity, even if we did not exercise such influence or did not believe we had a legal obligation to do so.

Current report

A transition that occurs too quickly may leave Arc vulnerable to governance attacks, coordination failures, or the dominance of a small number of concentrated ARC Token holders. A transition that occurs too slowly may result in regulators or courts treating Arc as an extension of our business and holding us liable for network activities. In addition, as governance becomes distributed, we will have limited ability to influence protocol decisions or prevent malicious, unlawful, or economically harmful outcomes, which could result in outcomes adverse to our business interests and/or our stockholders. For example, ARC Token holders could vote to implement changes to the protocol that increase ARC Token value at the expense of network utility, impose burdensome conditions on developers or users or otherwise make decisions that harm the long-term health of the ecosystem, and we will have limited ability to prevent or reverse harmful governance decisions once Arc becomes sufficiently distributed. Further, malicious actors may seek to influence or capture governance processes through ARC Token accumulation, coordinated voting, collusion, vote buying, borrowing arrangements, or other strategies, including so-called “empty voting” attacks. Such actors may also have economic or strategic incentives that are adverse to Arc, ARC Token holders, or us.

Current report

Further, as governance becomes distributed, our ability to respond to future legislation or other regulatory developments may be limited. For example, legislation or regulation related to decentralized finance that is perceived as being overly broad or burdensome may lead users of DeFi networks, including Arc at such time, to disfavor those networks, and we may be unable to regain control of Arc to assuage any such issues due to its distributed nature. Additionally, distributed governance could limit our ability to implement compliance, sanctions-screening, deny-list, or other security controls, and efforts to implement such controls could create disputes with users, validators, governance participants, or other ecosystem actors and reduce the utility or adoption of the network.

Current report

Our relationships with validators, developers, governance participants, and other ecosystem participants could be alleged to constitute a general partnership, joint venture, or other unincorporated association, which could expose us to joint and several liability for acts or obligations that we do not control.

Current report

We expect Arc to involve coordination with a range of third parties, including validators, developers, liquidity providers, governance participants, service providers, and other ecosystem participants. Although we do not intend for these relationships to form a general partnership, joint venture, or other unincorporated association, plaintiffs, regulators, or courts could nevertheless assert that, based on the facts and circumstances, we and one or more such parties were acting together as co-owners of a business or enterprise for profit, or that we held ourself out, or permitted itself to be held out, as a partner or equivalent participant in such an arrangement. Such claims could be based on, among other things, shared economic arrangements, token allocations, coordinated governance or validator activity, joint branding or marketing, collective decision-making, or other forms of cooperation across the Arc ecosystem.

Current report

If any such theory were accepted, we could be exposed to joint and several liability, or similar liability, for obligations, losses, misconduct, or other actionable conduct attributed to the alleged partnership, joint venture, or other enterprise, including claims arising from acts or omissions of other participants that we did not control and may not have been able to prevent. For example, we could face claims relating to governance decisions, sanctions or compliance failures, misleading statements by ecosystem participants, or other conduct undertaken by persons alleged to be acting on behalf of, or in the ordinary course of business of, the alleged enterprise. Even if such claims ultimately lack merit, the assertion of them could result in litigation, investigations, indemnification demands, reputational harm, substantial defense costs, and the diversion of management attention, and could adversely affect our business, financial condition, and results of operations.

Previous report

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Form 10-Q, including our unaudited condensed consolidated financial statements and the notes thereto, before deciding to invest in our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. If any of the following risks actually occurs, our business, results of operations, financial condition, and prospects would likely suffer. In such case, the trading price of our Class A common stock could decline, and you may lose all or part of your investment.

Previous report

Risks related to our business and industry

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We face intense and increasing competition.

Previous report

We operate in a rapidly changing and highly competitive industry, and our results of operations and future prospects depend in part on the continued growth of the Circle stablecoin network, our ability to monetize the Circle stablecoin network, and our ability to innovate and create successful new products and services and improve existing products and services.

Previous report

Although there may be certain regulatory and other barriers to enter the markets we serve, we nonetheless expect our competition to continue to increase. We face competition from both established enterprises and early-stage companies that are attempting to capitalize on the same, or similar, opportunities as we are. Some of our current and potential competitors have longer operating histories, particularly with respect to digital financial services products, significantly greater financial, technical, marketing, and other resources, and larger customer bases than we do. This may allow them to offer more competitive pricing or other terms or features, a broader range of digital financial products, or a more specialized set of specific products or services, as well as respond more quickly than we can to new or emerging technologies and changes in end-user and customer preferences. Additionally, when new competitors seek to enter our markets, or when existing market participants seek to increase their market share or revenues, they may offer terms, including fee structures, that are more favorable than ours, which could result in a decrease of our market share or revenues or lead us to adopt less profitable business practices, or otherwise exert downward pressure on our results of operations. For example, actions and policies of our distributors, over which we do not control or oversee, could negatively impact our results of operations. In any case, with increased competition, we may be required to incur additional costs or expenses relative to our revenue to maintain or grow the Circle stablecoin network and the market acceptance of our products and services.

Previous report

Our current or future competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services, which could attract end-users and customers away from our products and services. For example, we are seeing a rapidly evolving market structure in digital asset trading markets, and certain major trading firms are moving towards TMMFs as a form of collateral. Particularly in the current high interest rate environment, the option to invest in TMMFs or other yield-bearing digital assets has become increasingly attractive relative to holding non-yield bearing stablecoins, especially for those planning to hold these assets for an extended period of time. Therefore, as TMMFs become more readily accessible and widely integrated on blockchains as a form of collateral in margin trading, we expect to continue to see a shift toward the use of TMMFs or other yield-bearing digital assets, which could adversely affect the competitiveness and usage of USDC and EURC in this type of use case. Additionally, offshore competitors that purport to be outside of the reach of the GENIUS Act may have a competitive advantage due to more permissive regulatory and tax structures. Some of these competitors appear to not be regulated by any competent authority and to pay taxes that are significantly lower than what Circle pays. When new competitors seek to enter our markets, or when existing market participants seek to increase their market share, these competitors sometimes undercut, or otherwise exert pressure on, the pricing terms prevalent in that market, which could adversely affect our market share and/or ability to capitalize on new market opportunities.

Previous report

We currently compete at multiple levels with a variety of competitors, including:

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•payment services;

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•fiat-backed, asset-backed, digital asset-collateralized, algorithmic, non-backed and yield-bearing tokens;

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•blockchain infrastructure services;

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•digital asset safekeeping services;

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•banks and nonbank financial institutions; and

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•digital wallet providers platforms.

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In particular, we compete with and rely on traditional banks for many of the services we offer. We are subject to regulation by a variety of state and federal regulators across our products and services, and we rely on banks to provide banking services to our customers. This regulation by multiple federal, state, and local authorities increases our compliance costs, as we navigate multiple regimes with different examination schedules and processes and varying disclosure requirements. In addition, while the passage of the GENIUS Act has established a clear legal and regulatory framework for stablecoins in the United States, it may attract new market participants that compete with Circle. In particular, banks with well-established customer bases and financial infrastructures may decide to enter the stablecoin industry, which could intensify competition and cannibalize our growth opportunities.

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We believe that our ability to compete depends upon many factors, both within and beyond our control, including the following:

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•the size, diversity, and activity levels of our end-user and customer base;

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•the timing and market acceptance of products and services, including developments and enhancements to those products and services offered by us and our competitors;

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•trust, perception, and interest in the digital asset industry and in our products and services;

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•customer service and support efforts;

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•selling and marketing efforts;

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•the ease of use, performance, price, and reliability of solutions developed either by us or our competitors;

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•changes in economic conditions and government regulation and policies;

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•our ability to successfully execute on our business plans;

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•our ability to successfully integrate new products and services with our existing ones;

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•our ability to continue to enhance our technical infrastructure and technology;

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•our ability to enter new markets;

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•our ability to maintain and grow our partnerships with other market participants;

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•general digital payments, capital markets, blockchain, and stablecoin market conditions; and

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•our brand strength relative to that of our competitors.

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If we are unable to successfully compete in our industry, our business, results of operations, financial condition, and prospects could suffer materially.

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Competition from new and existing issuers offering competing products, combined with the rise of yield-bearing digital assets, including TMMFs, that are attractive to digital asset trading participants, may reduce market demand and circulation of Circle stablecoins.

Previous report

With significant growth in the stablecoin market and an increasing understanding that it represents one of the largest potential new markets for financial and payments infrastructures, we expect to continue to see intense competition. In addition, the emergence of yield-bearing digital assets represents an additional source of competition, particularly in light of the current high interest rate environment, which has amplified the opportunity cost of holding stablecoins relative to other yield-bearing digital assets. Stablecoins and other digital assets that are currently issued or may in the future be issued by digital asset trading platforms, major existing global payments companies, major asset management firms, and banks—along with decentralized algorithmic tokens—are likely to increase competitive pressure on Circle stablecoins and could slow our growth or cause significant declines in our market position. Some of these competitors have gained rapid adoption. Given the inherent network effects that accompany stablecoin usage, a rapidly growing competitor, or a well-established payments company, asset management company, or bank that enters the market, could gain enough market share to ultimately limit the viability of Circle stablecoins. As an example of such an adverse impact, the amount of USDT in circulation (the largest stablecoin by stablecoins in circulation, issued by Tether) increased while the amount of USDC in circulation declined for nearly a one year period from late 2022 to late 2023, which we believe reflects the different use cases and underlying competitive dynamics for the two stablecoins. New categories of products that provide novel and attractive features, such as yield-bearing digital assets (including TMMFs), could also gain market acceptance at any time. Additionally, some competitors purporting to be outside the reach of U.S. regulators and to maintain a stable one dollar peg have begun calling themselves, among other things, “synthetic dollars” that pay interest income to end-users. These yield-bearing assets may compete with Circle stablecoins and cannibalize our market share, particularly if we fail to anticipate such market shifts or are slow to enter into these nascent markets.

Previous report

In addition, we issue a TMMF, USYC, following our acquisition of Hashnote. The issuance of TMMFs represents a new facet of our business, and there is no guarantee that we will be successful. USYC may not gain traction relative to existing TMMFs and new TMMFs that compete with USYC may enter the market at any time. In addition, the success of USYC may adversely affect the competitiveness of USDC and EURC as margin collateral, as trading participants naturally gravitate towards yield-bearing digital assets in this particular type of use case. Our entry into this market may also impact our marketing strategy, and we may not be able to anticipate how our customers, shareholders, and the market will perceive and respond to any such shift. The pursuit of new product offerings may also divert management’s attention and redirect the flow of resources away from USDC and EURC. The risks associated with issuing a TMMF in general, and the specific risks of incorporating them into our existing business model, could hinder our ability to successfully implement our business plans and achieve our strategic objectives.

Previous report

Stablecoins may face periods of uncertainty, loss of trust, or systemic shocks resulting in the potential for rapid redemption requests (or runs). Extreme scenarios, such as market shocks that affect the value of USDC reserves or simultaneous requests to redeem all or substantially all USDC in circulation, or concerns related to Circle stablecoin reserves, may lead to redemption delays and USDC reserves being insufficient to meet all redemption requests.

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Privately issued stablecoins may be subject to the risk of significant and concentrated redemption requests, even when they are fully reserved with high quality liquid assets such as cash and short-dated U.S. government obligations. If we experience significant and concentrated redemption requests with respect to one or more Circle stablecoins, we may need to liquidate a significant portion of Circle stablecoin reserve assets to meet such requests. In extreme cases, the market for the short-dated U.S. government obligations held by the Circle Reserve Fund might not be sufficiently liquid for BlackRock to liquidate them in a way that allows us to meet redemption demands in a timely manner, which could potentially lead to redemption delays. In the most extreme cases, such as a request to immediately redeem all or substantially all of the USDC in circulation, the market for short-dated U.S. government obligations could experience price instability and the USDC reserve may not be sufficient to cover all such redemption requests. When reserve assets and proceeds from reserve assets are not sufficient to cover all redemption requests, we would be required under the laws governing our licenses and registrations as well as under the Circle Mint user agreement (which provides for the redemption of Circle stablecoins on a one-to-one basis for Circle Mint customers) to use our own capital to make up any shortfall. However, our reserve and other policies cannot deter, prevent, or fully protect against significant redemption demand or the ability for the Circle Reserve Fund to meet our redemption requests and banks to meet our withdrawal requests for demand deposits. Currently, all EURC reserve assets are held only in cash.

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Market participants have increasingly shown concern about the sufficiency and liquidity of reserves for dollar-denominated stablecoins such as USDT and USDC, including due to issues in the traditional financial markets. For example, in March 2023, we announced that we had initiated transfers of the more than $3 billion of deposits from Silicon Valley Bank (“SVB”) to other banks, but those transfers failed to settle before the Federal Deposit Insurance Corporation (the “FDIC”) placed the bank into receivership. Although all of these funds were ultimately made available and transferred to new banks, concerns related to Circle’s access to these funds caused USDC to experience a temporary price dislocation on certain secondary trading markets during the period when banks were closed and until the resulting backlog of redemption requests had been cleared, and the amount of USDC in circulation decreased thereafter.

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In addition, given the foundational role that stablecoins play in global digital asset markets, stablecoin growth has been tied closely to growth in digital asset markets. As a result, systemic risks that manifest themselves in the digital asset markets may lead to higher-than-normal redemption requests on Circle stablecoins, which could lead to significant and concentrated redemption requests with respect to one or more Circle stablecoins. The collapse of TerraUSD and LUNA in May 2022 underscored the risks associated with algorithmic tokens, which are continuing to play out as trading firms and retail and institutional lenders are facing liquidation and insolvency in the aftermath, as reflected in the Voyager Digital Ltd. and Celsius Network LLC insolvency proceedings, among others. Additionally, the collapse and subsequent insolvency proceedings of FTX also expose the contagion risks related to the broader digital asset market.

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These market events have brought significantly more attention to some of the risks with digital assets, and we believe have contributed, in part, to outflows from USDC at such times. We believe these events in the traditional financial markets and digital asset markets have underscored the importance of robust transparency, audits, and having regulated stablecoins as building blocks for trust and the functioning of a well-regulated, orderly market for digital assets. While the digital asset market has shown signs of recovery, the full extent of these events may not yet be known. Impacts include, but are not limited to, the consequent and ongoing financial distress and bankruptcy of certain digital asset market participants, loss of confidence in the broader digital asset market, reputational harm to digital asset market participants, increased negative publicity of the broader digital asset market, heightened scrutiny by regulators and lawmakers, and calls for increased regulation of digital assets and digital asset market participants. Except as described elsewhere in this Form 10-Q (see “Management’s discussion and analysis of results of operations and financial condition—Key factors affecting operating results—Exogenous events and macro trends”), we have had no material direct impact to our business, financial condition, customers, or counterparties from these events; however, these events caused changes to the digital asset market as described above, which indirectly impacted our business and our revenue potential. We do not have any known material financial exposure to any digital asset market participant that faced insolvency and liquidity issues, experienced excessive redemptions or suspended redemptions or withdrawals of digital assets, allegedly mishandled customer funds, or experienced significant corporate compliance failures in connection with these events.

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We are unable to predict the timing or severity of any runs on Circle stablecoins. For example, the collapse of one digital asset or company, including those in the traditional finance sector, such as banks, may result in contagion effects for Circle or the broader digital asset market.

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As a relatively new innovation, stablecoins are particularly susceptible to operational challenges and risks, including due to surges in demand.