Open USD poses biggest threat yet to Circle's USDC, CoinShares says

Open USD, a bank-backed group developing a dollar-pegged stablecoin, is the most credible threat yet to Circle Internet's (CRCL) $USDC because it targets the economics at the heart of the company’s business, crypto asset manager CoinSharessaid in a Monday report.

Unlike traditional stablecoin issuers, who keep the income generated by their reserves, Open USD plans to distribute the yield to participating businesses, retaining only a management fee. CoinSharessaid the model could squeeze Circle's margins while raising the cost of maintaining $USDC distribution.

“If successful, Open USD could push stablecoins further into mainstream payments by making the economics and governance more attractive for the businesses actually using them,” wrote analyst Luke Nolan.

Developed by Open Standard, the institutional-focused stablecoin is backed by a consortium of more than 140 companies, including BlackRock (BLK), Coinbase (COIN), Mastercard (MA), Stripe and Visa (V), and is targeting a second-half 2026 launch. Key details, including its reserve structure and fee model, remain undisclosed.

The model also strengthens Coinbase's hand ahead of the Aug. 18 renewal of its revenue-sharing agreement with Circle, under which the exchange receives roughly half of $USDC's reserve income, the report said.

$USDC's circulating supply has fallen to about $73 billion from nearly $80 billion in March, trimming its share of the roughly $312 billion stablecoin market as competition from newly regulated issuers intensifies.

Circle shares fell more than 17% on the day Open USD was announced, though CoinSharessaid the decline was likely amplified by technical selling linked to the Russell index reconstitution.

Still, the report argued the market may be overreacting. Open USD has yet to launch, important details remain unresolved and Circle retains a significant advantage through $USDC's deep liquidity and years of integrations across exchanges, DeFi and payments.

Open USD is unlikely to pose a major threat to Tether, whose dominance in emerging markets and offshore dollar liquidity gives USDT, the largest stablecoin by far, a different competitive moat, the report added.

For now, investors should watch whether Circle changes its distribution strategy and whether Open USD can convert its high-profile backing into adoption, CoinShares said. Until then, the project remains a credible, but unproven, challenge to $USDC.

CoinShares is not alone in noting the challenge posed by Open USD. Japanese investment bank Mizuho downgraded Circle to underperform from neutral and slashed its price target to $50 from $85 in a note to clients on Tuesday, arguing that the new rival’s business model threatens the stablecoin issuer's long-term economics.