Morgan Stanley initiated coverage of Circle with an Equal-weight rating and assigned a $66 price target, saying the stock is unlikely to command a premium until stablecoin adoption becomes more widespread and revenue streams move beyond crypto-focused use cases.
The bank noted that Circle is favorably positioned among stablecoin issuers due to its regulatory approach and reserve framework, but it views short-term risks as outweighing immediate upside. Key concerns include an uncertain U.S. regulatory environment, a lackluster crypto market and sensitivity to interest rates - the latter directly influencing Circle's interest-based revenue.
Morgan Stanley identified the slowing of the CLARITY Act in the Senate as a negative development for Circle. The firm highlighted ongoing debates over whether stablecoin issuers should be permitted to pass through yield to holders, a proposal that has met resistance from banks worried about potential deposit outflows. The bank noted that lawmakers may reconsider the bill in mid-2026, which leaves policy uncertainty in place.
Circle issues USDC, the second-largest stablecoin, with roughly $70 billion outstanding as of early February. Morgan Stanley said current demand for USDC remains concentrated in a few areas: crypto trading, corporate treasury and collateral management, and dollarization in high-inflation economies. Circle estimates that about half of USDC usage is tied to crypto-related activity, with smaller proportions used for decentralized finance and dollar-denominated savings.
On addressable markets, Morgan Stanley placed a near-term figure at about $3.6 trillion, covering margin financing, remittances, crypto derivatives and deposits in inflation-prone countries. Over the longer term, the bank saw the potential for gradual expansion into cross-border payments through Circle's Payments Network, while stressing that meaningful adoption across those corridors is likely to be incremental.
The analyst team also emphasized earnings constraints. They pointed to the current U.S. rate trajectory and a largely fixed cost base as factors that limit visibility into near-term profitability for Circle. Additionally, Morgan Stanley argued that many of the touted advantages of stablecoins - such as immediate settlement and lower transaction costs - become less compelling when users ultimately convert back to fiat currencies.
Morgan Stanley stated it would adopt a more constructive stance if three developments occurred: faster adoption of stablecoins, scaling of non-crypto use cases or a sustained improvement in crypto market momentum. In the absence of those developments, the bank expects investor caution to persist despite Circle's potential as a network play over the longer term.
Key takeaways
- Equal-weight initiation with $66 price target; valuation upside tied to broader adoption and revenue diversification.
- Strengths include regulatory-aligned positioning and reserve structure; near-term risks include regulation, crypto market and rate sensitivity.
- Near-term addressable market estimated at about $3.6 trillion; longer-term payments expansion expected to be gradual.