Circle IPO Sparks Controversy: Founding Principles of the Encryption Industry Face Challenges

Circle, as the issuer of the USDC stablecoin, should have had its IPO become an important milestone for the cryptocurrency industry moving towards mainstream finance. However, the issuance process has sparked widespread controversy within the industry. A senior executive from an investment institution, speaking from the perspective of an eyewitness, strongly criticized Circle's tendency to favor traditional financial institutions in the IPO allocation, while ignoring crypto-native participants. This criticism was used to explore why the core concept of "alignment of interests" in the cryptocurrency industry is frequently deviated from within the traditional IPO system.

Circle completed its initial public offering (IPO) last week, pricing at $31 per share (above the initial expected range of $24 to $26). The closing price on the first day was $84, and by the end of the week, the stock price had exceeded $107. The investment bank's pricing of this IPO can be considered a serious misstep, and it also reflects Wall Street's heightened enthusiasm for encryption assets, particularly stablecoins.

Reasons to be Bullish on CRCL:

1. This is currently the first and only listed investment target focused on the growth of stablecoins, an investment opportunity that investors have been waiting for seven years.
2. The stablecoin market is expected to grow to over $1 trillion in managed assets, which alone is enough to constitute a compelling investment story.
3. USDC currently has an asset management scale of 60 billion dollars, with an annual growth rate of 91%.

Reasons for Bearish Outlook on CRCL:

1. This is a business model that relies entirely on interest rates, and its total revenue comes from interest income;
2. Circle relies on a certain trading platform as an issuing agent, and that platform takes about half of the interest revenue.
3. Circle also relies on an asset management company, which has partnerships with many banks that are trying to enter the stablecoin market to compete with Circle and Tether.
4. Over the past three and a half years, the company has seen almost no revenue and profit growth (though EBITDA increased by 60% year-on-year);
5. The current stock price valuation of $107 is relatively high, with the following valuation indicators:
   • Approximately 30 times gross profit;
   • About 110 times the profit;
   • Adjusted EBITDA is approximately 59 times. (Annualized for the first quarter of 2025)

Criticism of Circle's IPO Allocation

Many industry insiders have stated that Circle's choice to allocate shares to traditional financial institutions (TradFi) rather than to crypto-native funds during the IPO allotment process is a huge mistake. They believe that Circle should take responsibility for the implied messages behind this decision.

According to reports, many early users and promoters of USDC, including some institutions closely related to the IPO underwriters, have indicated that they either received a very small allocation or did not receive an allocation at all. This further confirms the fact that Circle favors traditional Wall Street financial institutions while ignoring crypto-native supporters.

An industry veteran stated: "I still can't find any encryption-native institution that received reasonable treatment in this IPO allocation. This situation is simply absurd and shows Circle's extremely shortsighted behavior."

The core values of the encryption industry are challenged

This individual emphasized that his criticism is not based on personal emotions, but rather on principles. He stated: "When it comes to advancing the encryption industry 'correctly' and adhering to principles of integrity, I am extremely passionate and emotionally invested."

He pointed out that many pioneers in the encryption industry have long stood at the forefront of the industry, advocating and fighting for it. They have spent a significant amount of time initiating and winning rights protection actions against some poorly managed encryption companies that harm the interests of investors or clients.

"We have always been exposing what we believe to be industry fraud and misconduct, even if it means having some very uncomfortable conversations with friends or partners. It is equally worth it." he said.

The Importance of the "Customer First" Philosophy

This industry insider emphasized that he believes when you make your clients wealthy, your company will naturally succeed. He cited examples of certain well-known trading platforms, DeFi projects, and even some gaming projects that, despite facing difficulties now, still maintain a high level of satisfaction among their founders, employees, clients, and investors. The reason lies in one word: "Alignment."

He believes that tokens are the greatest capital formation and user growth mechanism in history, as they can immediately align the interests of all parties involved, turning customers into core users and brand evangelists. However, Circle completely and deliberately ignored its customers in this IPO.

Disappointment with Circle

This individual stated that the institution he belongs to has been a client and partner of Circle for nearly a decade. When USDC had yet to gain market recognition and had almost no managed assets, they utilized their platform to support and promote USDC. They have defended USDC and the entire stablecoin sector, arguing against those institutions that referred to the whole industry as a "joke."

"Our trading and operations team has worked alongside the Circle team, providing practical assistance during product testing, optimization suggestions, and major crises (such as the bank crisis in March 2023 and the USDC de-pegging event)." He said, "Yet in this IPO, we received only a very low allocation ratio. This result is no different from a slap in the face."

Response to Criticism

In response to the claim that some people believe encryption institutions "want to take advantage of airdrops," this person stated: "One difference between IPOs and airdrops is that we are willing to buy stocks at the same price as everyone else. Airdrops are usually free giveaways. More importantly, the distribution of airdrops is often based on an algorithmic formula, which is transparent and automated; whereas the allocation of IPOs is a manual process, and Circle can fully control who gets how much."

Regarding the view that the underwriters should be blamed rather than Circle, he emphasized: "Circle is the client in this transaction, they pay high fees to the lead underwriter and have complete final decision-making authority. They have the right to review all orders and can directly control how much each person receives."

Finally, he expressed great anticipation for the upcoming 13F filing (the institutional holdings report disclosed by the U.S. SEC) to see which investors Circle has chosen to share their growth dividends.