The investment bank noted that the emergence of the Stripe- and Coinbase-backed stablecoin consortium could hinder USDC's growth.
By Krisztian Sandor|Edited by Stephen Alpher Jul 1, 2026, 4:11 p.m. 3 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on Circle CEO Jeremy Allaire (Danny Nelson/CoinDesk)SummaryShow- After a sharp decline on Tuesday, Circle shares rose on Wednesday; however, Jefferies alerted investors that increasing competition from bank and fintech-backed stablecoins, particularly the new Open USD consortium, may challenge USDC’s market position.
- The Open USD initiative, supported by over 140 companies, including Stripe, Coinbase, Visa, Mastercard, and BlackRock, intends to distribute reserve income among participants, potentially making it an appealing option for payment providers.
- Circle CEO Jeremy Allaire and ARK Invest’s Lorenzo Valente expressed doubts about the ability of a large consortium to coordinate effectively and manage regulatory challenges, suggesting that USDC’s established network effects and regulatory presence provide it with a competitive advantage over newcomers.
Circle (CRCL) shares experienced a 5% increase on Wednesday following a 17% drop the previous day, as market participants consider whether the Open USD consortium, backed by major firms like Stripe, Mastercard, Coinbase, and BlackRock, presents a significant threat to USDC's issuer.
Global brokerage Jefferies remains skeptical that the recent selloff has fully accounted for the risks, asserting that Circle is facing increasing competitive challenges as financial institutions and fintechs continue to launch their own stablecoins.
"Should you buy the dip? We advise against it," the Jefferies analyst team remarked in a client note.
They cautioned that challenges for CRCL are unlikely to diminish, predicting that competition may affect USDC's supply growth and market share.
According to Jefferies, Circle, which commands approximately 25% of the $300 billion stablecoin sector, is entering a more competitive landscape. While USDC enjoyed a head start since its 2018 debut, the firm highlighted that new entrants now possess advantages in substantial built-in distribution networks that Circle initially lacked.
The advent of Open USD, with backing from over 140 companies including Stripe, Coinbase, Visa, Mastercard, and BlackRock, signifies this shift. The consortium's approach to sharing reserve income with its partners could make it more appealing to payment providers and fintechs.
Jefferies analysts also pointed out the risk posed by Coinbase’s involvement. Circle generates about 95% of its revenue from interest on USDC reserves and depends heavily on Coinbase, its primary distribution partner. Their commercial agreement is reportedly up for renewal in August.
While the brokerage does not interpret Coinbase joining Open USD as a sign of a shift away from USDC, it acknowledges that the exchange might eventually endorse competing stablecoins, which could hinder USDC's growth.
Network advantages versus emerging competitors
In response to competitive concerns, Circle CEO Jeremy Allaire defended USDC's position in a detailed post on X on Wednesday, contending that stablecoins operate as network businesses developed over time, not products that can be easily replicated.
He highlighted USDC's extensive ecosystem of integrations, robust liquidity across various exchanges and decentralized finance protocols, and regulatory approvals in regions like Europe and Japan as significant advantages that new entrants will struggle to replicate.
Allaire also challenged one of Open USD's key selling points, which is the sharing of reserve income with partners. He indicated that Circle already distributes the majority of its income to distribution partners while maintaining sufficient revenue for infrastructure investments.
"Giving away all the income is a recipe for starving an infrastructure," Allaire commented.
He expressed skepticism about the consortium model as a whole, noting, "Large groups of large companies have a history of poor coordination, misaligned incentives, slow decision-making, and a lack of space for genuine, lasting innovation."
Evaluating the consortium model's viability
This skepticism resonates with Lorenzo Valente, director of digital asset research at ARK Invest, who pointed out that the crypto sector has witnessed numerous consortium-backed stablecoin initiatives over the years, such as Meta's Diem and Paxos-led Global Dollar Network.
"Every year, we see a consortium-style initiative emerge around a stablecoin," Valente stated in an X post. "While the players involved are undoubtedly formidable, I remain highly doubtful that any of these initiatives can achieve significant scale."
He suggested that Open USD's primary obstacle may be effectively coordinating over 140 participants with competing interests.
"A consortium of numerous rivals has no precedent for successful operation," he remarked. "The speed of decision-making among competitors is likely to be extremely slow."
Valente compared this model to decentralized autonomous organizations (DAOs), which often struggle with timely decision-making due to their governance structures.
"Being 'owned by everyone' often translates to a lack of accountability," he commented. "I would place my bets on two operators who can act independently over a committee that must seek consensus from hundreds of rivals."
He also raised concerns about whether major banks, payment networks, and technology firms would remain dedicated if the initiative faces regulatory challenges. He noted that Circle and Tether have spent years establishing global regulatory frameworks and licenses, while a consortium might find it more difficult to maintain alignment under adverse conditions.