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Coinbase reports earnings after the closing bell today, and, given the ongoing Crypto Winter, its Q3 performance is likely to be as grim as the first two quarters, when it posted losses of $440 million and $1.1 billion. The company’s broader fortunes won’t turn around until there’s an uptick in crypto trading—but until then Coinbase does have a financial ace up its sleeve that will give investors something to cheer.

That ace comes in the form of revenue from the stablecoin USDC, which it jointly owns through a consortium with Circle. Like most stablecoins, USDC is backed 1 to 1 by reserves of cash and Treasury bills—reserves on which it collects interest but doesn’t have to pass on to its customers. It’s like owning a bank where people park their savings but receive a 0% interest rate.

The income that Circle and Coinbase make on these reserves is not a secret but has until now received little attention. That’s largely because it was launched in an environment of near-zero interest rates, where safe investments like T-bills paid only a pittance. Fast-forward to late 2022 when the one-year T-bill is brushing 5% and the Fed is vowing more hikes in the future, and it’s a very different ball game.

It’s hard to know just how much Coinbase is poised to earn from USDC as the company has not discussed the topic, but there are a few clues. A monthly attestation published by Circle, for example, shows there are currently around $47 billion USDC in circulation, while a Securities and Exchange Commission filing states Coinbase is entitled to a prorated share of revenue based on how many USDC each company has issued. The filing suggests the portion issued by Coinbase has historically been around a third. If you prefer a different sort of estimate, an analyst told the Wall Street Journal in September he expects Coinbase to make $700 million in USDC income in 2023 and 2024—an amount nearly equal to the company’s total revenue last quarter.

The USDC revenue has flown below the radar in part because Coinbase doesn’t break it out, but instead tucks it into a line on its financial statements called “interest income.” The figure on that line jumped fivefold year over year for Coinbase in Q2, coming in at $32.5 million—and we can expect that to jump even more for Q3 and subsequent quarters as interest rates continue to climb.

The growing USDC revenue may not be enough to lift Coinbase’s slumping share price in the near term, but, over the coming year, the company’s secret gold mine is going to help nicely as it waits for the end of Crypto Winter.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

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