Circle Soared Almost 60% This Year: 1 Reason It Will Grow More and 1 Reason to Be Cautious

Circle Internet Group (NYSE: CRCL) was one of several crypto businesses to go public last year. Its initial public offering (IPO) coincided with surging enthusiasm about the potential for stablecoins, and investors saw Circle stock as a relatively safe way to get exposure to this evolving sector. The issuer of USD Coin (CRYPTO: USDC) went public at $31 per share on June 5. By June 23, it had soared to almost $300.

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The stock couldn't sustain those gains. It finished the year at about $80 -- a 73% decline from its summer high. This year, things have swung in the other direction. As of March 20, the stock is trading at about $125, having gained almost 60% year to date. Long term, I think it could rally further.

1 reason Circle will grow

Stablecoin adoption continues apace. That's good for Circle because it earns interest on the reserves that back the stablecoins it issues. The more USDC in circulation, the larger Circle's yield-generating reserve base.

Circle generated $2.6 billion from its reserve income last year. According to its full-year earnings report, the amount of USDC issued rose to $75.3 billion in 2025, up 72% from the year before. Circle's reserve earned a yield of 4.1%, although some of that income goes to Coinbase (NASDAQ: COIN) as part of their partnership agreement.

Research from The Motley Fool shows that USDC is the second-biggest stablecoin, accounting for about a quarter of the $315 billion in circulating stablecoins. Some predict the total market could expand to $2 trillion in the coming years. If USDC maintains the same market share, Circle's reserves could grow increase $500 billion.

That kind of stratospheric growth may sound unrealistic. A lot depends on whether stablecoins become an everyday vehicle for things like payments and money transfers. Pay attention to the way that banks, card networks, and payment processors adapt to stablecoins. Circle is working with major players such as Intuit, Deutsche Borse Group, and Visa. These partnerships could help USDC remain a key part of this fast-paced industry.

1 reason for Circle caution

Stablecoins are a relatively new addition to the global financial infrastructure. The evolving regulatory environment poses the greatest risk for Circle investors. The firm needs regulations that will build confidence and open the way for further mainstream adoption, rather than rules that hamper its operations.

A lot of last year's stablecoin progress was spurred by passage of the Genius Act, which set out a framework for how stablecoins should be issued and backed. It removed roadblocks and provided the necessary impetus for traditional financial institutions and payment providers to explore stablecoin integration.

Unfortunately, the next legislative step -- the Digital Asset Market Clarity Act -- has stalled, and stablecoin interest is a significant sticking point. The Genius Act prohibits stablecoin issuers like Circle from paying interest on deposits. However, third parties, like Circle's longtime partner Coinbase, can (and do) legally pay customers stablecoin interest. Banks want to close that loophole.

Progress in Washington may take longer than many in the crypto industry hope, but the genie is out of the stablecoin bottle. More transactions are moving on-chain, and Circle's USDC is a leading light. Circle's compliance-friendly approach has helped it attract major partners. Still, if regulation goes the wrong way, that could also be its Achilles' heel.

Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuit and Visa. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.