Circle Internet Group (NYSE: CRCL) dropped close to 4% in early Wednesday trading after its second-quarter profit came in above Wall Street forecasts while revenue fell short.

Stablecoin demand also rose during the quarter as fresh conflict in the Middle East made crypto markets more volatile. Traders cut exposure to riskier tokens and parked more funds in dollar-linked assets.

Circle reported $701 million in combined sales and reserve earnings for the three months ended June, an increase of 7% from last year. Profit from continuing operations came to $48 million, compared with a loss-heavy period a year earlier.

Circle grows USDC usage while lower interest returns limit reserve earnings

The amount of USDC in circulation stood at $73.3 billion at the end of June, up 19% from the previous year. Average circulation during the quarter reached $76.5 billion, representing growth of 25%.

Activity on public blockchains rose much faster. USDC handled $14.8 trillion in on-chain transfers during the quarter, up 151% from last year.

Circle generated $668 million from the assets backing USDC, which was 5% higher year over year. The increase came from having more tokens in use, but weaker interest returns kept the gain smaller. The average yield earned on reserves fell 66 basis points to 3.5%.

Revenue from subscriptions, services, and other products reached $34 million, up 41%. Revenue left after distribution expenses totaled $289 million, a rise of 15%. The related margin increased by 302 basis points to 41%.

Adjusted EBITDA margin came to 50%, down 329 basis points. Profit from continuing operations equaled 7% of total revenue and reserve earnings.

Circle spent $412 million on distribution, transactions, and other related costs. That figure rose 1%, mainly because payments to distribution partners increased.

Standard operating expenses fell 56% to $254 million as last year’s IPO compensation charges disappeared from the comparison. Costs on an adjusted basis still rose 23% to $146 million. Circle put more money into engineering, new infrastructure, artificial intelligence systems, and upcoming products.

The company held $12.4 billion of USDC directly on its own platform at quarter-end, more than double the amount from a year earlier. USDC stored there accounted for an average 19.5% of total circulation each day, an increase of 1,204 basis points.

Users created $83 billion worth of new USDC during the quarter, up 97%. They also returned $87 billion for redemption, up 113%.

USDC ended June with a 27% share of the large, publicly attested dollar-backed stablecoin market. Its share fell 66 basis points from the previous year.

The number of active on-chain wallets holding more than $10 in USDC grew 24% to 7 million.

Circle’s payments network also added more institutional traffic. Based on the final 30 days of the quarter, the Circle Payments Network reached an annualized volume of $14.7 billion. That was 76% above the previous quarter. Enrollment climbed 29% to 175 financial institutions.

Circle lines up banks and payment firms before Arc opens to the public

Circle plans to open the Arc blockchain to the public on September 16. More than 100 companies and development teams are already working with the network.

Arc will include private transaction features, tools for programmable finance, support for autonomous software, and systems for issuing tokenized versions of traditional assets.

Circle named its first outside validator group during the earnings announcement. The list includes BlackRock (NYSE: BLK), Galaxy Digital (Nasdaq: GLXY), Global Payments (NYSE: GPN), Intercontinental Exchange (NYSE: ICE), Mastercard (NYSE: MA), SBI Holdings (TSE: 8473), Standard Chartered (LSE: STAN), Sumitomo Corporation (TSE: 8053), and Visa (NYSE: V).

DTCC and MoneyGram will also help validate Arc. Under that setup, financial firms using the blockchain will take part in protecting and operating it.

BlackRock, BNY Mellon (NYSE: BK), DTCC, and Standard Chartered are working on possible Arc connections. Their projects cover tokenized securities, crypto custody, stablecoin access, foreign exchange trading, and repurchase agreements.

BlackRock expects to issue its BUIDL institutional liquidity fund on Arc. DTCC plans to let firms create blockchain versions of assets held through The Depository Trust Company.

BNY Mellon added direct USDC creation and redemption to its digital-asset custody service. The bank already holds most of the assets backing the stablecoin.

A bank-run system was introduced by Standard Chartered which allows institutional clients to exchange traditional money for USDC, redeeming the tokens from the same account arrangement.

Circle kept its long-term forecast for USDC circulation at a 40% compound annual growth rate. It raised its 2026 forecast for other revenue from $150 million to $170 million to a new range of $310 million to $330 million.

The company also lifted its expected margin after distribution costs from 38% to 40% to 41.7% to 43.7%. Its full-year adjusted operating expense target stayed at $570 million to $585 million.

Don’t just read crypto news. Understand it. Subscribe to our newsletter. It’s free.