Key facts
- Open USD, a stablecoin backed by over 140 companies, is seen as a major threat to Circle's USDC.
- Unlike current stablecoin issuers, Open USD plans to distribute yield generated by its reserves to participating businesses.
- Key partners in Open USD include BlackRock, Coinbase, Mastercard, Stripe, and Visa.
- The stablecoin is expected to launch in the second half of 2026.
- CoinShares noted that Open USD's model could squeeze Circle's margins and impact its distribution economics.
- Mizuho downgraded Circle to underperform, citing the threat to its long-term economics.
Open USD, a new stablecoin initiative backed by a consortium of over 140 companies including BlackRock, Coinbase, Mastercard, Stripe, and Visa, is poised to become the most significant challenger to Circle's dominant USDC stablecoin, according to a report by crypto asset manager CoinShares. The report, released Monday, highlights that Open USD's core competitive advantage lies in its planned distribution of yield generated from reserves to its participating business partners, a model that directly contrasts with current stablecoin issuers like Circle who retain such income.
CoinShares analyst Luke Nolan stated that this yield-sharing model could make stablecoins more attractive for mainstream adoption by improving economics and governance for businesses utilizing them. The proposed structure could potentially squeeze Circle's profit margins and increase the costs associated with maintaining USDC's distribution network. This development also comes at a crucial time for Coinbase, as it faces the renewal of its revenue-sharing agreement with Circle on August 18, an arrangement where Coinbase currently receives approximately half of USDC's reserve income.
Despite the potential threat, CoinShares acknowledged that USDC benefits from established liquidity and extensive integrations across exchanges, decentralized finance (DeFi) platforms, and payment systems, which would be difficult for any newcomer to replicate. The report also suggested that Open USD is unlikely to significantly challenge Tether, which holds a different competitive advantage through its dominance in emerging markets and offshore dollar liquidity.
USDC has recently seen a decline in its circulating supply, falling from nearly $80 billion in March to approximately $73 billion, reducing its share of the roughly $312 billion stablecoin market amidst increasing competition from newly regulated issuers. Following the announcement of Open USD, Circle's shares experienced a notable drop of over 17%, though CoinShares suggested this decline may have been exacerbated by technical selling related to index rebalancing.
Japanese investment bank Mizuho also weighed in, downgrading Circle to 'underperform' from 'neutral' and significantly cutting its price target from $85 to $50, citing concerns that Open USD's business model poses a threat to Circle's long-term economic viability. CoinShares advised investors to monitor Circle's potential adjustments to its distribution strategy and Open USD's ability to translate its high-profile backing into actual user adoption.