Mizuho Warns Circle’s Bank Approval Fails to Address USDC Challenges

Mizuho Warns Circle’s Bank Approval Fails to Address USDC Challenges

Japanese investment bank Mizuho has reiterated its neutral stance on Circle, stating that the Office of the Comptroller of the Currency’s (OCC) approval for a national trust bank will not resolve the challenges facing the company, particularly with regard to the growth of its stablecoin, USDC.

Market Reaction and Share Performance

Following the news of Circle’s final approval to establish the First National Digital Currency Bank, the company’s shares experienced a temporary boost, closing 5% higher. However, this increase was short-lived, as shares dropped 4.7% to $63.03 shortly thereafter, reflecting ongoing investor concerns.

Key Issues Identified by Mizuho

Mizuho analysts highlighted that while the national bank charter is a significant milestone, it does not address vital issues impacting Circle’s stock performance. The bank pointed out that USDC’s market capitalization has been declining since March 2026, potentially threatening its growth trajectory.

Circle’s stablecoin has recently faced increased difficulties, with its circulating supply decreasing by approximately $7 billion from its March peak, falling to around $74 billion in July. This marked the largest monthly contraction since 2022, raising flags about the implications for transaction volumes and reserve income, despite a strong on-chain usage.

Competitive Pressures in the Stablecoin Market

The report also noted rising competition from Open USD, a new stablecoin backed by a consortium of over 140 financial and tech companies including Mastercard and Coinbase. Mizuho emphasized that the emergence of consortium-backed stablecoins illustrates the risk of commoditization within the sector, complicating efforts for Circle to maintain a competitive edge, despite its new banking charter.

In summary, Mizuho remains cautious, suggesting that investors should not be overly optimistic about the recent bank approval given the core challenges that persist for Circle and its growing competition in the stablecoin market.