Alex Xu argues that Circle’s latest problem is tied to the balance of power between stablecoin issuers and the channels that distribute them. As the range of stablecoin products expands, he writes, bargaining power is shifting toward exchanges, merchant networks, wallets, card issuers and even AI terminals, not away from them. In that setup, distribution partners could keep absorbing a larger share of stablecoin profits.
According to Coinbase CEO Brian Armstrong, Coinbase will renew its revenue-sharing agreement with Circle next month on the current terms. That means Circle will still hand over half of its profits to Coinbase outside Circle-owned channels, while profits generated by USDC held on Coinbase’s platform will continue to belong to Coinbase.
USDC’s market position did not produce better economics for Circle
Before that, some bullish observers had expected Circle to secure a more favorable revenue-sharing deal with Coinbase because of USDC’s leading position in the compliant stablecoin market. One possibility discussed in that camp was a lower sharing ratio. Based on Armstrong’s comments, that did not happen.
Xu says the Coinbase agreement is only one example. In his view, several recent developments point in the same direction: the negotiating leverage of distribution channels is rising.
Hyperliquid and Robinhood Chain as reference cases
The first case involves Hyperliquid. Under a new agreement between Hyperliquid and Coinbase, Hyperliquid will take 90% of the reserve profit generated by the platform’s existing USDC balances.
The second case centers on Robinhood Chain, a rising L2 whose main stablecoin is USDG, issued by Paxo, rather than USDC. Xu writes that this choice has had little effect on user growth and activity. At the same time, USDG is returning 97% of channel revenue to Robinhood Chain.
From those two examples, along with the emergence of more compliant stablecoin alternatives such as OUSD, Xu argues that Circle is likely to face a tougher environment when negotiating with established crypto channels such as Binance, not an easier one.
He frames the issue this way: “If Hyperliquid has bargaining power when negotiating with Coinbase/Circle, then doesn’t Binance? Doesn’t Kraken? If you give Hyperliquid such favorable revenue-sharing terms but offer me poor terms, do you think Binance and Kraken are easy to push around?”
Pressure may be greater outside crypto
Xu writes that the situation is worse because this squeeze on bargaining power is already happening inside crypto, a market he describes as Circle’s long-standing home ground.
He then extends the same argument to potential growth markets, including traditional offline and online merchant payments and future Agent payments. In those segments as well, he says, Circle faces pressure from channels and from direct competition.
In traditional payments, Stripe, Visa and Master control merchant and banking networks, as well as dispute resolution and compliance infrastructure. Xu’s point is that they are not merely in a position to compress USDC’s margins. They are also entering the competition directly through the OUSD stablecoin. He adds that Coinbase, one of Circle’s main partners, is also among the supporters of that project.
Agent payments remain uncertain
In Agent settlement, Xu says it is still unclear whether stablecoins will win a large enough share of payments at all. He argues that traditional payment infrastructure and points systems built on commercial contracts appear sufficient for Agent calls at this stage. As for edge cases such as high-frequency, low-value payments, he says the market size is too small.
Circle also faces another issue in both traditional and Agent payment scenarios, according to the article: merchants, agents and consumers largely do not care which stablecoin sits underneath settlement. Xu lists USDC, USD1, OUSD and OUSG, and says the market may view all of them simply as compliant options.
In those settings, he argues, Circle’s bargaining position against channels, merchants and consumers is likely even weaker than it is in crypto.
Author’s view for investors
Xu closes by saying that anyone who already invests in Circle, or is considering investing in the company, should factor these issues into the analysis.
He also says these concerns did not emerge only after Circle fell. He points back to a March 21 piece, “From Tencent and Circle: The Easy and Hard Questions of Investing,” where he had already discussed Circle’s problems. At the time, he writes, optimistic investors were still cheering Circle’s return to 130.
In his account, later events — including OUSD, Hyperliquid securing a 90% revenue share, and the failure to renegotiate the Coinbase agreement — merely confirmed that earlier line of reasoning. He ends with a caveat: “This is just one person’s view, for reference only.”