CoinShares warns Open USD threatens Circle's USDC dominance as 140-partner consortium grows

Open USD's yield-pass-through model could force Circle to share more reserve income with distribution partners, compressing margins and eroding USDC's market position.

CoinShares warned that Open USD, a stablecoin backed by more than 140 companies including Mastercard, Stripe and BlackRock, poses the most significant competitive threat yet to Circle Internet Group's USDC, potentially forcing the issuer to overhaul its revenue model.

"Open USD's structure fundamentally challenges the economics that have made USDC one of the most profitable stablecoins in the market," the CoinShares report said, according to a summary reviewed by Edgen.

USDC's circulating supply has fallen to about $73 billion from nearly $80 billion in March, according to DefiLlama data, as the stablecoin market has contracted by roughly $10 billion since May. Open USD, launched June 30 by the Open Standard consortium, offers a model where most reserve income flows to issuers and distributors rather than the stablecoin operator.

The competitive pressure arrives as Circle prepares to renegotiate its revenue-sharing agreement with Coinbase Global, its largest distribution partner, in August — a negotiation where Coinbase's dual role as both a USDC partner and an Open USD consortium member could strengthen its leverage.

Wall Street Turns Bearish on Circle's Economics

Mizuho downgraded Circle to underperform from neutral and slashed its price target to $50 from $85, with analyst Dan Dolev saying Open USD "could fundamentally alter CRCL's business model, which relies on retaining a large portion of the treasury yield to drive revenues." The Japanese bank raised its 2027 distribution and transaction cost estimate to 73% from 64%, cutting its adjusted EBITDA forecast to $699 million from $1.09 billion — roughly 25% below Wall Street consensus of $941 million.

JPMorgan also struck a cautious tone, flagging what analysts led by Kenneth Worthington called a "prisoner's dilemma" in Circle's revised revenue-sharing deal with Hyperliquid. "The change in the Hyperliquid relationship showcases the challenge for Circle and Coinbase partnership agreements because it can create a prisoner's dilemma that drives Coinbase and Circle to compete with each other when promoting USDC distribution," Worthington said.

Circle shares traded at $62.63, down 0.6% on the day, and have fallen more than 20% this year.

Open USD's Model Reshapes Stablecoin Economics

Unlike USDC, which captures reserve income before sharing a portion with partners such as Coinbase and Binance, Open USD charges a small operating fee and distributes most reserve income to issuers and distributors. The consortium includes more than 140 partners, giving it distribution reach that rivals USDC's network.

Circle CEO Jeremy Allaire has argued that USDC's liquidity advantages and network effects create an "operational moat" built over a decade that would be difficult for a new entrant to replicate. However, the backing of major financial institutions including Visa, Mastercard and BlackRock gives Open USD credibility and distribution that previous stablecoin challengers have lacked.

Baird maintained its outperform rating on Circle but cut its price target to $100 from $138, noting that second-quarter revenue may come in slightly below Wall Street forecasts while EBITDA should meet expectations.

This article is for informational purposes only and does not constitute investment advice.