A partnership meant to grow USDC may have just exposed an uncomfortable truth for Coinbase Global, Inc. (NASDAQ:COIN) and Circle Internet Group, Inc. (NYSE:CRCL): expanding the stablecoin ecosystem isn’t always good for profits. But as near-term economics come under pressure, Washington may be preparing to hand both companies a much bigger opportunity.
JPMorgan believes the new Hyperliquid partnership will weigh on earnings for both firms, yet says pro-crypto legislation backed by President Donald Trump‘s administration could ultimately prove to be the more important story for investors.
Hyperliquid Changes The Economics
Coinbase and Circle announced in May that Hyperliquid would adopt USDC as its preferred stablecoin, a move designed to deepen the token’s presence across one of crypto’s fastest-growing decentralized exchanges.
The catch? JPMorgan says the revised arrangement significantly changes how the two companies split the economics.
Coinbase will now classify USDC held on Hyperliquid as “on-platform,” allowing it to earn reserve income before paying 90% of that revenue back to Hyperliquid. The firm estimates roughly $6 billion of USDC, or about 8% of the circulating supply, now sits on the platform.
The result is a near-term revenue headwind for both companies, prompting JPMorgan to lower earnings estimates. The brokerage now expects the full impact of the revised economics to become more visible during the second half of 2026, alongside a softer crypto trading environment marked by lower volumes, weaker digital asset prices and declining DeFi activity.
The Prisoner’s Dilemma
JPMorgan argues the Hyperliquid deal highlights a broader challenge for the Coinbase-Circle partnership.
Rather than simply sharing the benefits of USDC adoption, both companies are incentivized to compete for distribution partners. Winning those relationships could increasingly require giving away a larger share of the economics, creating what the analysts describe as a classic “prisoner’s dilemma.”
In other words, USDC adoption may continue to grow while the value each company captures from that growth gradually shrinks.
Washington May Be The Bigger Catalyst
That’s why JPMorgan believes investors shouldn’t lose sight of the bigger picture.
The firm continues to view U.S. digital asset market structure legislation as a potential turning point for the industry, even as the path to passage becomes more uncertain with the Senate’s legislative calendar narrowing ahead of its August recess.
Clearer crypto rules could encourage greater institutional participation, improve market confidence and accelerate development across the digital asset ecosystem—all of which could expand demand for USDC.
JPMorgan also expects higher interest rates to support reserve income through 2027, particularly for Coinbase, even after trimming its forecasts for USDC balances.
For investors, Hyperliquid may explain the next few quarters. But if Trump’s crypto agenda succeeds in creating a clearer regulatory framework, the long-term winner may not be the company that negotiated the better deal—it could be the one serving a much larger stablecoin market.
Photo: Skorzewiak on Shutterstock.com
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