From Circle to Frax, the gameplay of the stablecoin ecosystem

Original Title: “From CRCL to FRAX: The Next GENIUS Act Play”

Written by: @100y_eth, Four Pillars

Compiled by: J1N, Techub News

Circle successfully went public, what is the secret?

The victory of the stablecoin industry

On June 5, 2025, Circle officially listed on the New York Stock Exchange (NYSE) under the stock code CRCL. The IPO issuance price was set at $31 per share, higher than the previously expected range of $27 to $28, raising approximately $1.1 billion. On the first day of listing, the opening price was $69, and the closing price was $83. As of August 25, 2025, the stock price has risen to about $135, making it one of the most successful IPO cases in recent years.

The listing of Circle is not only an important milestone for the company itself but also a significant event for the entire cryptocurrency industry, especially the stablecoin sector. With the passage of the “GENIUS Act,” the easing of SEC regulations, and the crypto-friendly policies of the Trump administration, Circle's listing has sent a signal to the market: cryptocurrency companies can successfully enter the traditional financial markets. At the same time, Circle's strong performance in the public market has also boosted confidence in the prospects of stablecoin infrastructure within the traditional financial system.

In other words, Circle's listing is not only its own success but also a victory for the entire stablecoin industry.

Circle's vertical integration strategy

Circle is one of the largest stablecoin issuers in the world, currently issuing the USD-pegged USDC and the Euro-pegged EURC. Based on the vision of “building a new type of internet financial system”, Circle offers a range of vertically integrated products:

Circle Payments Network (CPN): A global funds transfer standard created by Circle, aiming to be a blockchain-based alternative to SWIFT. Financial institutions and businesses can efficiently complete cross-border remittances and settlements through CPN and multiple public chains.

Circle Mint: Integrated with traditional banking networks (such as Wire, SEPA), businesses and institutions can instantly mint or redeem USDC and EURC 1:1 through Circle Mint, which is the only official direct issuance channel.

Circle Wallets: SDK wallet service for Web2 enterprises that allows easy integration of blockchain wallets and provides features such as account abstraction, MPC security, cross-chain support, and compliance options.

CCTP: USDC is natively issued on over 20 public chains, leading to fragmented liquidity. CCTP is a cross-chain messaging protocol launched by Circle that enables secure cross-chain USDC transfers through a burn-and-mint mechanism.

Circle Paymaster: Based on the ERC-4337 account abstraction feature, it allows users to pay Gas with USDC or have Gas sponsored by third parties, achieving a gasless experience.

USYC: By the end of 2024, Circle acquired the issuer of USYC, Hashnote, integrating it into its product matrix. USYC is a tokenized money market fund composed of U.S. Treasury bonds and reverse repos, serving as an on-chain yield product and collateral asset for institutional clients.

Arc: In August 2025, Circle announced the launch of the L1 network Arc, specifically designed for USDC, utilizing a high-performance consensus algorithm aimed at further enhancing the circulation efficiency of USDC.

Through the above products, Circle is not only a stablecoin issuer but also a provider of stablecoin infrastructure, achieving a comprehensive layout from issuance, wallets, cross-chain to L1 networks and institutional services, becoming a model of vertical integration strategy.

From the perspective of user experience, Circle's product matrix provides a complete on-chain financial service closed loop. For example, a company can instantly mint USDC 1:1 through Circle Mint, allow customers to easily use stablecoins via Circle Wallets, Paymaster, and CCTP, optimize the trading experience using the Arc network, and finally settle across institutions through CPN.

The core of stablecoins is not issuance, but practicality. Circle's strategy proves that the true value of stablecoins lies in their implementation and use cases.

The reason Circle is favored by capital

Circle has garnered such high attention in the traditional financial market, not only due to its product layout but also because of the important roles played by the macro environment and business model:

The “GENIUS Act” has been passed: the first federal law in the United States to explicitly regulate dollar stablecoins, laying a legal foundation for the stablecoin industry, with Circle's internal standards almost directly becoming legal norms.

Trump Administration's Cryptocurrency Policy: On July 30, 2025, the U.S. President's Digital Asset Market Working Group released a 160-page cryptocurrency policy roadmap, outlining the strategy for the U.S. to become a global cryptocurrency hub.

SEC's regulatory attitude shifts: New chairman Paul Atkins is more friendly towards cryptocurrencies, launching the “Crypto Projects” initiative to make the regulatory framework more transparent.

Market Share Advantage: USDC currently has a circulation of approximately $63 billion, accounting for 30% of the stablecoin market. Due to USDT not complying with the “GENIUS Act”, USDC has become the largest compliant stablecoin under the U.S. regulatory framework.

Business Model: Circle's revenue mainly comes from the yield on USDC reserves in US Treasury bonds and buybacks, with revenue of 658 million USD in Q2 2025 and adjusted EBITDA reaching 126 million USD.

The current political and regulatory environment in the United States has provided Circle with a perfect stage and has also ushered in a historic opportunity for the entire stablecoin industry.

Korean investors, LFG!

Interestingly, Circle is not only popular in the United States but also highly favored in other countries. In fact, according to the ranking of overseas stocks purchased by South Korean investors in June 2025, Circle (CRCL) topped the list with a net buying amount of over $600 million. This figure is not only 1.6 times that of the second-ranked Tesla 2x ETF but also four times that of the third-ranked Coinbase, and far exceeds Alphabet ($100 million) and Apple ($90 million).

Why has Circle attracted such strong attention in South Korea? The reason is that Korean investors have long been active in U.S. stock trading, but a deeper factor is that the domestic market in South Korea is igniting an investment boom around stablecoins. In June 2025, President Lee Myung-bak officially took office and clearly expressed strong support for the legalization of stablecoins, which has become a key driving force for Koreans' interest in the stablecoin industry.

Of course, South Korea still faces many obstacles in the process of promoting the full legalization of won-based stablecoins, such as strict foreign exchange controls, the conservative stance of the Bank of Korea, and the limited size of the South Korean short-term bond market. However, whenever a company or institution applies for a trademark related to stablecoins, its stock price skyrockets, indicating that interest in stablecoins exists not only in the blockchain sector but also attracts the attention of ordinary stock market investors.

Looking for the next GENIUS beneficiary

Who comes after Circle?

With Circle's successful listing, companies and investors are naturally turning their attention to the stablecoin industry, looking for the companies and protocols that will benefit the most from the implementation of the “GENIUS Act”. Coinbase is frequently mentioned as a beneficiary, as nearly half of Circle's USDC reserve income flows to Coinbase. In Q2 2025, Circle's total reserve income reached 634 million USD, with over 50% (332.5 million USD) flowing to Coinbase.

Besides companies like Coinbase that benefit indirectly, which publicly traded companies have issued stablecoins compliant with the “GENIUS Act” and received direct benefits like Circle? Unfortunately, there are currently no such companies in the U.S. stock market. Paxos is the second-largest U.S.-based stablecoin issuer, but it is a private company that has not gone public.

On-chain opportunities

Even if you can't find the next Circle in the stock market, there's no need to be disappointed. Because on-chain, there are already dollar stablecoin protocols that meet the requirements of the “GENIUS Act.” Currently, there are only two protocols that explicitly aim to issue stablecoins compliant with the “GENIUS Act”: one is Ethena, and the other is Frax Finance.

Source: Ethena

Ethena offers two types of stablecoins: USDe and USDtb. USDe does not meet the standards of the “GENIUS Act” because its reserves are based on a “Delta Neutral” position in the futures market. However, the reserves for USDtb consist of MMF fund BUIDL and stablecoins. Furthermore, the issuer of USDtb transitioned from the British Virgin Islands (BVI) to being issued through Anchorage Digital Bank in July 2025, thus preparing to comply with the “GENIUS Act.”

Frax Finance issues the frxUSD stablecoin, which is backed by various dollar-denominated money market fund (MMF) tokens and US Treasury fund tokens. Notably, the founder of Frax Finance, Sam Kazemian, is one of the key figures behind the push for the legislation of the “GENIUS Act.”

In March of this year, Sam met with Senator Cynthia Lummis, a co-sponsor of the “GENIUS Act,” and provided advice and support during the drafting process, contributing to the successful establishment of a legal framework for digital dollars. Unlike other protocols, Frax Finance not only builds products around its core business but also actively participates in regulatory discussions, working closely with lawmakers to develop the regulatory framework. This is a typical case of policy entrepreneurship. Due to the founder's personal involvement in the formulation of the bill, Frax Finance undoubtedly has a deeper understanding of the “GENIUS Act” than anyone else and is able to precisely design frxUSD around this legal framework.

frxUSD: The first stablecoin compliant with the “GENIUS Act”

Frax's stablecoin operating system

Frax Finance aims to issue stablecoins in a reliable manner and build scalable infrastructure for widespread use. To this end, Frax Finance has introduced the concept of Stablecoin OS, which includes three core products: frxUSD, FraxNet, and Fraxtal.

frxUSD: A stablecoin compliant with the GENIUS Act, it is the core asset of liquidity in the Frax ecosystem;

FraxNet: A platform where users can issue and redeem frxUSD in various ways, while earning stable returns from non-custodial stablecoin holdings under the compliance of the GENIUS Act.

Fraxtal: A high-performance EVM L1 blockchain specifically designed for frxUSD, using FRAX as the Gas token.

For stablecoins, issuance is certainly important, but the “use case” is even more critical. Frax Finance not only issues frxUSD in compliance but also provides an easy-to-use frontend platform for frxUSD, called FraxNet, as well as a blockchain specifically designed for frxUSD, called Fraxtal.

In this architecture, frxUSD plays the role of currency, FraxNet is akin to a combination of fintech and banking, while Fraxtal serves as the underlying technological support for the entire financial system. The synergy of the three constitutes the core operation of the frxUSD ecosystem.

In addition, Frax Finance also offers a variety of services including Fraxswap (decentralized trading), Fraxlend (decentralized lending), and frxETH (Ethereum liquid staking protocol), thereby building a full-stack stablecoin and DeFi ecosystem.

frxUSD, the first stablecoin compliant with the GENIUS standard

Source: GovInfo

Frax Finance founder Sam Kazemian was directly involved in the drafting of the “GENIUS Act”, so he and the Frax team have a deep understanding of this legislation. Based on this regulatory expertise, Frax Finance officially began issuing the regulatory-compliant stablecoin frxUSD in February this year. So, what kind of stablecoin can be considered “compliant with the GENIUS Act”? Does frxUSD truly meet the requirements of the GENIUS Act?

In order to comply with the issuance standards of the “GENIUS Act”, stablecoins must meet the following conditions: (In addition to the following provisions, there are also requirements for external audits, capital adequacy ratios, anti-money laundering (AML) compliance, and bankruptcy repayment priority, which involve internal operations and will not be discussed here.)

Issuance Qualification

Only issuers authorized in the United States can issue stablecoins, which are divided into three categories:

Subsidiary of a bank or credit union;

Institutions approved by the Office of the Comptroller of the Currency (OCC) in the United States;

Institution approved by state-level financial regulatory authorities.

According to the governance proposal FIP-432, all rights and responsibilities related to the issuance, reserve management, and compliance of frxUSD are transferred to FRAX Inc. FRAX Inc. is a company registered in the state of Delaware, USA, and is currently preparing to apply for a stablecoin issuance license from the OCC or state financial regulators to meet the requirements of the GENIUS Act.

Reserve requirements

The core principle of the “GENIUS Act” regarding stablecoin reserves is 1:1 full collateralization, meaning that the total amount of issued stablecoins must be backed by at least an equivalent amount of reserve assets. The reserve assets are limited to the following highly liquid categories:

Cash in USD or balance in Federal Reserve account;

Current deposits or withdrawable deposits, insured deposits, and credit union shares;

U.S. Treasury bonds with a remaining or initial term of no more than 93 days;

An overnight repurchase agreement signed by the issuer as the seller, with collateral being U.S. Treasury bonds with a remaining term of no more than 93 days;

An overnight reverse repurchase agreement signed by the issuer as the buyer, with U.S. Treasury bonds as collateral;

Registered government money market funds, or securities registered under the Investment Company Act of 1940 that hold only the above-mentioned assets in the class from (i) to (v);

Other assets directly issued by the U.S. federal government that have liquidity and stability comparable to the aforementioned assets.

(i), (ii), (iii), (vi), (vii) the tokenized form of the listed assets.

Source: Frax Finance

The reserves of frxUSD are entirely composed of tokenized assets, mainly including:

USTB: The tokenized form of the Superstate Short Duration US Government Securities Fund issued by Superstate, based on Reg. D Rule 506© and the Investment Company Act 3©(7).

BUIDL: A tokenized form of the BlackRock USD Institutional Digital Liquidity Fund issued by Securitize, with investment targets including U.S. Treasuries, cash equivalents, and repurchase agreements, issued based on Reg. D Rule 506© and the Investment Company Act 3©(7) provisions;

WTGXX: A tokenized form of the WisdomTree Government Money Market Digital Fund issued by WisdomTree, investing in short-term U.S. Treasury bills and U.S. government agency debt, officially registered as a government money market fund under the Investment Company Act Section 2a-7.

USDB: A stablecoin issued by Bridge and acquired by Stripe;

USDC: A stablecoin issued by Circle.

Therefore, the reserve composition of frxUSD complies with the terms of (viii), holding assets of the class (i) and (vi) in tokenized form, and maintaining over 100% over-collateralization, fully meeting the reserve requirements of the GENIUS Act, thereby achieving currency stability.

3.2.3 Profit Distribution

The “GENIUS Act” stipulates that stablecoin issuers cannot directly pay interest to users for “holding or using” stablecoins. This provision aims to prevent the confusion of stablecoins with deposits, avoid misunderstanding them as investment assets, and ensure the stability of the financial system.

Since frxUSD follows the “GENIUS Act”, users will not earn interest merely by holding frxUSD. However, if users hold frxUSD within FraxNet, they can receive stable returns from bond yields. At first glance, this may seem to conflict with the Act, but that is not the case. The key point is that the interest is not directly paid by the issuer, but is rewarded by an independent distribution platform. FraxNet is operated by Frax Network Labs Inc., registered in Delaware, and is an independent legal entity from the issuer. Therefore, only users holding frxUSD within FraxNet can receive yield rewards.

According to the “GENIUS Act,” users holding frxUSD in personal wallets (such as MetaMask) or in exchanges that support frxUSD cannot earn interest. This model is not unique to Frax Finance; Circle's USDC and PayPal's PYUSD have also adopted the same approach.

For example, Coinbase pays approximately 4.1% yield to users holding USDC within the Coinbase App, while PayPal pays about 3.7% yield to users holding PYUSD within the PayPal App. This is because Coinbase and PayPal are independent legal entities from the issuers Circle and Paxos.

Frax Follows CRCL: Familiar Yet Further Ahead

So far, we have analyzed how Circle successfully went public and introduced Frax Finance's frxUSD.

But when you read the section on Frax Finance, do you feel a sense of déjà vu? The path that Frax Finance takes to build its stablecoin ecosystem is quite similar to the direction of Circle.

The first layer “Familiarity”: Currency

The first point of “déjà vu” lies in the issuance method of stablecoins.

Circle and Frax Finance both plan to issue stablecoins that comply with the “GENIUS Act” standards, which are backed by reserve assets such as cash, short-term U.S. Treasury bonds, and repurchase agreements to maintain stable value and provide liquidity “lubricant” for the next generation of financial systems.

In the use of interest income from reserve assets, Frax Finance has a greater internal circulation space compared to Circle:

The interest income from USDC reserves is entirely owned by Circle.

The interest income generated from the reserves of frxUSD is used to reward holders of frxUSD on the FraxNet, the team operations, and the remaining portion is allocated to the core token holders of the Frax ecosystem, the stakers of FRAX.

This structure means that the more frxUSD is issued, the more prosperous the Frax ecosystem becomes, further promoting the issuance of frxUSD and creating a positive feedback loop.

Second Layer: Front-end Experience

Circle offers a front-end product with a high user experience that allows USDC holders to easily use the stablecoin:

Circle Mint: Simplifying the issuance and redemption of stablecoins;

Circle Wallet: Convenient for wallet integration;

Circle Gateway: Cross-chain asset management tool.

Source: FraxNet

Similarly, Frax Finance offers a user-friendly frontend called FraxNet, allowing frxUSD users to easily participate in various financial activities:

Multi-asset issuance: Users can issue frxUSD using stablecoins such as USDC, USDT, PYUSD, USDB, as well as bank wire transfers, and even RWA tokens (like USTB and WTGXX), similar to Circle Mint.

Embedded Wallet: Users can log into FraxNet using Google and other accounts, with the system automatically generating a blockchain wallet, making it easy for users unfamiliar with blockchain to get started, similar to Circle Wallet.

Asset Dashboard: FraxNet provides a comprehensive asset dashboard across networks, allowing users to have a clear view and convenient transfers, similar to Circle Gateway;

Passive Income: Users holding frxUSD in FraxNet can automatically earn bond interest income, just like earning yields by holding USDC in the Coinbase App. Frax Finance will also return the earnings to frxUSD holders.

While multi-asset issuance and passive income are powerful features in themselves, these four characteristics have become standard in modern financial services.

FraxNet takes a step further by building a stronger vertically integrated product and user experience than Circle Mint through the following plans:

Virtual Visa Card: In collaboration with Stripe and Bridge, FraxNet will launch a virtual Visa card that connects to the Visa network, allowing users to spend FraxNet assets directly in the real world.

Virtual Bank Account: Frax Finance is collaborating with Lead Bank to provide users with virtual bank accounts, enabling deposits and withdrawals within the traditional banking system, enhancing the user onboarding experience.

FraxNet Mobile: In 2026, FraxNet will launch an App to provide users with a complete mobile banking experience.

The goal of FraxNet is not only to provide the basic functions of wallets, trading, monitoring, and yield for stablecoin issuance protocols, but also to achieve a complete user interaction loop through bank cards, bank accounts, and mobile services, allowing stablecoin applications to truly integrate into real life.

Third Layer: Backend Infrastructure

In the financial system, the importance of the backend is no less than that of the frontend. Even if the frontend experience is excellent, if the backend where funds actually flow is inefficient, users cannot obtain a quality experience. To this end, Frax Finance will launch its own high-performance blockchain Fraxtal in February 2024.

Fraxtal is optimized for the Frax ecosystem, aiming to become the underlying payment rail for frxUSD. In fact, it builds a dedicated backend for its own ecosystem, making Frax Finance an industry pioneer.

Since the launch of Fraxtal, many stablecoin projects have begun to layout dedicated chains optimized for their own stablecoins:

Converge: Ethena is collaborating with Securitize to develop a high-performance blockchain Converge, aiming to bridge DeFi and traditional finance around ENA and USDe;

Stable and Plasma: Tether has invested in two major chains, Stable and Plasma, which focus on USDT transfers and payments.

Arc: Circle has recently launched a blockchain optimized for USDC, Arc.

It can be said that Frax Finance has foresighted the direction of industry development. The launch of Fraxtal is not only the birth of another new chain, but also a pioneering move that signifies the future development of financial infrastructure.

Stablecoin Trinity

The three core elements of today's financial system are currency, front-end, and back-end.

Today, we can easily participate in economic activities because fintech companies provide convenient front-end solutions that connect users to the complex back-end of payments, securities, and remittances.

From the development trends of the financial industry, the existing complex and inefficient back-end will gradually migrate to blockchain.

Under the current trend, the three key elements of the blockchain financial system are: stablecoins, front-end, and blockchain network.

This is the “stablecoin trinity”, and Frax Finance is one of the few projects that simultaneously builds these three elements, demonstrating a vertically integrated development direction.

Towards the 'North Star'

Source: Frax Finance

Since March of this year, Frax Finance has been preparing for the “GENIUS Act” and has begun the “North Star” upgrade to overhaul the protocol architecture. This upgrade includes:

Rename the old version of the Frax protocol tokens FRAX and FXS to frxUSD and FRAX;

Replace the Gas token of the Fraxtal chain from frxETH to FRAX;

And make significant adjustments to multiple core mechanisms such as the token incentive structure.

Frax Finance is at a crucial turning point in a new chapter. From the political leadership demonstrated by the founders in drafting the “GENIUS Bill” proposal, to the vertical integration product vision planned through Stablecoin OS, and now to the comprehensive upgrade of the protocol through North Star, Frax Finance is more prepared than any project for the future envisioned by the “GENIUS Bill”.

Some may think that Frax Finance is just “copying” Circle's roadmap, but quite the opposite. With the integrated front-end platform FraxNet and the blockchain Fraxtal designed specifically for backend payment infrastructure, Frax Finance has proven itself not only to be keeping pace with the industry but also to be actively shaping the development trajectory of the stablecoin industry. These innovations demonstrate that Frax Finance is a pioneer in the industry, pointing the way for the future development of the entire ecosystem.

Just as ancient navigators relied on the North Star to guide their direction, Frax Finance has established a new reference system for the entire industry through this North Star upgrade. This is not just a protocol upgrade, but a benchmark establishment action for the industry. Ultimately, Frax Finance will become a guiding light at the forefront of the stablecoin field, just like the North Star.