Goldman Sachs Research Report Analysis: Circle and USDC Are Moving Beyond the Crypto World, Cross-Border Payments and AI Agents Become the New Battleground

By: Rita

TechFlow Guide

Goldman Sachs released the management meeting minutes for Circle Internet Group (CRCL.US) on July 5. Circle is the issuer of USDC. The core message of this meeting is: stablecoins are transforming from edge tools in the crypto world into infrastructure for traditional finance and the AI economy. USDC use cases are rapidly expanding, extending from crypto trading to cross-border payments, consumer e-commerce, capital market settlement, and even AI agent payments. Goldman Sachs' rating on Circle is Neutral, with a target price of $96. The current stock price is $64.62, indicating an upside potential of approximately 48.6%.

Stablecoin Growth Has Decoupled from Crypto Market Cycles

Circle management repeatedly emphasized a judgment during the meeting: stablecoin growth has decoupled from the ups and downs of the crypto market. In the past few quarters, crypto market trading volume and prices have been declining, but stablecoin market cap and trading volume continue to rise.

The reason lies in the diversification of use cases. Circle divides USDC application scenarios into five layers, covering the full spectrum from crypto ecosystem to AI agent payments.

The crypto ecosystem is USDC's base, cooperating with rapidly growing platforms like Hyperliquid to continuously expand liquidity.

Cross-border payments and treasury management are currently the fastest-growing sectors. USDC's instant settlement and extremely low transaction costs are changing traditional bilateral cross-border payment processes. Circle mentioned that demand for USD stablecoins is particularly strong in emerging markets; this is a "digital dollarization" trend where people use USDC to replace local currencies or unreliable banking systems.

Consumer e-commerce use cases are also taking shape. Mainstream e-commerce platforms like Stripe and Shopify have begun supporting USDC payments, allowing users to choose USDC directly at checkout. Stablecoin-linked credit cards are also emerging, enabling users to hold and spend stablecoins.

Breakthroughs in the capital market are even more critical. Circle sees the potential of USDC as collateral for derivatives and a settlement currency. Recently, the CFTC approved futures commission merchants to treat specific stablecoins as collateral that can be liquidated at any time, which is an important institutional catalyst. Real World Asset tokenization is also expanding USDC application scenarios; stablecoins are the natural cash settlement tool for on-chain transactions.

The differentiated scenario Circle emphasizes most is AI agent payments. AI agents are autonomously executing economic activities; x402 is currently the leading agent payment protocol, with USDC accounting for approximately 99% of all transactions on the protocol. AI agents require atomic settlement and extremely low transaction costs, making stablecoins the most suitable payment tool.

USDC's Competitive Moat is Network Effects

Management believes that stablecoins are a typical network effect business. USDC's network is public internet financial infrastructure that anyone can access; individuals, enterprises, and developers can all use it.

Circle listed three major competitive advantages of USDC.

First is the breadth of distribution and platform ecosystem. USDC strengthens liquidity by continuously adding partners, forming a "liquidity supernova" effect. New stablecoin entrants find it difficult to replicate this network effect due to cold start problems; without liquidity there are no users, and without users there is no liquidity.

Second is global liquidity depth. USDC has deep liquidity in exchanges, OTC markets, payment networks, and collateral markets; this depth itself is a moat.

Third is compliance infrastructure. USDC has regulatory layouts in multiple jurisdictions; management believes this is precisely a key driver for institutional adoption, not a constraint.

Regarding competition, Circle distinguishes between two types of opponents. One is tokenized deposits, digital deposit certificates issued by banks. Circle believes stablecoins have advantages over tokenized deposits because stablecoins are open, interoperable, have no bank credit risk, and are fully reserved. The other is new stablecoin competitors; Circle expects more new stablecoins to emerge, but they lack the network effects Circle has accumulated over more than a decade.

The Difference Between Tokenized Deposits and Stablecoins is Structural

Circle believes the difference between stablecoins and tokenized deposits is structural, not just a matter of who comes first.

Stablecoins are a public, open internet financial system that anyone can access, where liquidity can flow freely across platforms. Tokenized deposits are more like an extension of the banking system, still trapped within a single bank or consortium ecosystem. These are two completely different architectures; stablecoins are internet-native, while tokenized deposits are a digital upgrade of the banking system.

Another key difference is credit risk. Stablecoins are fully reserved, credit-risk-free digital cash. Tokenized deposits are essentially bank liabilities, carrying bank credit risk. In Circle's view, this difference is fundamental.

Circle's Three Strategic Products Aim to Turn Stablecoins into an Operating System

Circle is not just a stablecoin issuer; they are building themselves into an internet financial platform. Management emphasized three strategic products during the meeting.

Arc is Circle's self-developed Layer 1 public chain, positioned as a comprehensive financial operating system, aiming to enhance liquidity and interoperability, especially attracting traditional financial institutions.

Circle Payments Network (CPN) is a cross-border payment product, achieving faster and more efficient cross-border payments through blockchain settlement; institutional adoption rates are growing.

Agentic Stack is a product line for AI agents, aiming to maintain USDC's dominant share in AI-related economic activities. Considering USDC already accounts for approximately 99% of transaction volume on the x402 protocol, the first-mover advantage in this field is obvious.

Regulation is a Catalyst, Not a Constraint

The market has always worried that stablecoin regulation would limit Circle's business model, but Circle management gave a completely opposite interpretation. If the CLARITY Act market structure bill passes, Circle believes this will be a catalyst for USDC growth, not a business constraint. There are three reasons: the bill allows issuers to continue incentivizing distribution through revenue sharing, so Circle can continue expanding partners; the bill may unlock institutional-level crypto adoption, bringing greater stablecoin usage; the bill encourages usage-based reward mechanisms rather than passive holding, which will drive active USDC use and reduce idle accumulation.

TechFlow Perspective

Goldman Sachs' rating on Circle is Neutral, but this minutes document itself explains many issues. Circle is expanding USDC from a crypto trading tool into internet financial infrastructure; this direction is correct.

What deserves questioning is, how deep is Circle's moat really? Network effects do exist, but USDC's biggest competitor USDT still leads in stablecoin market cap. The compliance advantage Circle relies on is precisely a weakness in the eyes of crypto fundamentalists; transparency means regulatable, regulatable means freezeable. USDC's institutional positioning is a double-edged sword.

Another point worth noting is Goldman Sachs' valuation framework. The target price of $96 corresponds to a 35x P/E ratio, but Circle's current profitability highly depends on interest income from reserve assets. If interest rates decline, Circle's profits will be directly pressured; this risk was lightly touched upon in the minutes, but its actual impact on valuation is greater than regulation.

Disclaimer

This article is TechFlow Research's organization and interpretation of third-party brokerage research reports. The ratings, target prices, earnings forecasts, and related judgments cited in the text are the views of the brokerage analysts, representing only their affiliated institution's stance, not representing TechFlow Research's views, nor constituting any investment advice.

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