Open USD Emerges as Major Threat to Circle’s USDC, Says CoinShares

Open USD Emerges as Major Threat to Circle’s USDC, Says CoinShares

In a recent report, CoinShares identified Open USD, a consortium-backed stablecoin, as a significant competitive threat to Circle’s USDC. The report suggests that Open USD challenges Circle by altering the revenue structure traditionally associated with stablecoins. Instead of the issuer retaining income from the reserves, Open USD is set to share this income with its partners, which could negatively impact Circle’s financial margins if Open USD launches as planned in 2026.

Implications of the Open USD Model

According to CoinShares analyst Luke Nolan, Open USD may compel traditional issuers like Circle to rethink their revenue models. By distributing the income generated by reserves to participating businesses, while keeping only a management fee, Open USD’s approach could intensify competition in the stablecoin market. Nolan noted that if successful, this model could facilitate broader adoption of stablecoins in mainstream payments, making them more appealing to businesses.

Background on Open USD’s Development

Developed by Open Standard, Open USD is backed by a diverse consortium that includes major financial entities such as BlackRock, Coinbase, Mastercard, Stripe, and Visa. The stablecoin aims for a launch in the latter half of 2026, though critical details about its reserve structure and fee model remain undisclosed.

Market Reactions and Future Outlook

Following the announcement of Open USD, Circle’s stock experienced a decline of over 17%, though analysts suggest this may have been influenced by technical factors related to index reconstitution rather than just competitive pressures. Despite this, there are mixed opinions on the scale of the threat posed by Open USD, as Circle continues to benefit from a significant liquidity advantage and established integrations across platforms.

Additionally, Japanese investment bank Mizuho has recently downgraded Circle’s stock, lowering its price target due to concerns over the new rival’s potential to disrupt Circle’s long-term economics. In early trading, Circle shares were noted at $65.61, reflecting a modest recovery.

Final Considerations for Investors

Investors are advised to monitor any changes in Circle’s distribution strategy in response to Open USD’s potential market entry. While Open USD presents a credible challenge, it remains unproven until it can effectively leverage its robust corporate backing into widespread adoption.