Open USD, backed by major firms, threatens Circle's USDC with a new income distribution model, potentially impacting Circle's profits.
Open USD, a stablecoin initiative backed by a coalition of over 140 firms, including major players like BlackRock and Visa, is set to pose a significant threat to Circle's USDC upon its anticipated launch in late 2026, according to a report by CoinShares.
Open USD's Unique Approach May Pressure Circle's Margins
Unlike traditional stablecoins that retain reserve income, Open USD plans to distribute earnings among its partner companies, potentially squeezing Circle's profit margins. This innovative model could shift the competitive landscape within the stablecoin market.
Analyst Luke Nolan from CoinShares commented, “If successful, Open USD could further integrate stablecoins into mainstream payment systems by enhancing the economic and governance appeal for businesses utilizing them.”
Open USD is developed by Open Standard, and its launch is eagerly awaited as it promises to reshape the dynamics of the stablecoin ecosystem. However, specific details regarding its reserve structure and fee models have yet to be disclosed.
Despite the looming competition, CoinShares noted that USDC's established liquidity and integrations across various platforms may provide a buffer against new entrants. USDC's circulating supply has recently dropped to around $73 billion from nearly $80 billion earlier this year, reflecting increasing competition in a market valued at approximately $312 billion.
Following the announcement of Open USD, Circle's stock experienced a notable decline, falling over 17%. Analysts suggest that this drop may have been intensified by technical selling related to the Russell index rebalancing. However, the overall market reaction might be overstated given that Open USD has not yet launched, and Circle still holds a substantial advantage through its existing market presence.
Mizuho, a Japanese investment bank, has also recognized the challenges posed by Open USD, downgrading Circle's stock to underperform while reducing its price target significantly.
As investors keep a close eye on potential changes to Circle's distribution strategy, the ability of Open USD to gain traction in the market will be critical to its success. Until then, it remains a promising yet unproven contender in the stablecoin arena.
