Circle Internet Group shares experienced a sharp decline on Tuesday, falling more than 16% in trading, following the announcement of a new dollar-backed stablecoin initiative backed by a consortium of over 140 financial, technology, and cryptocurrency companies. The project, named Open USD (OUSD), is seen by investors as a direct competitive threat to Circle's USD Coin (USDC), one of the largest stablecoins in the market.
The consortium behind Open USD includes major players such as Visa, Mastercard, Stripe, BlackRock, Bank of New York Mellon, Coinbase, Alphabet's Google, IBM, Klarna, American Express, Standard Chartered, BBVA, DBS, Shopify, SoFi, Adyen, Gemini, Galaxy, Ripple, Crypto.com, and Polygon. Notably absent from the group are Circle, Tether, and PayPal, highlighting the competitive nature of the initiative.
Open USD's Revenue-Sharing Model Could Disrupt the Market
Open Standard, the developer of Open USD, stated that the stablecoin will launch later this year and will allow users to mint and redeem tokens at no cost. The project's revenue-sharing structure is a key differentiator: nearly all income generated from the reserves backing the token, after deducting a small management fee and operational expenses, will be distributed among participating companies that adopt and help expand the network. This model contrasts sharply with the approach of major stablecoin issuers like Circle and Tether, which retain most of the reserve income.
USDC, co-founded by Circle and Coinbase, currently has approximately $73.6 billion in circulation, making it the largest US-based stablecoin. Together with Tether's USDT, they account for roughly 80% of the more than $300 billion global stablecoin market. The entry of Open USD, with its broad coalition and revenue-sharing incentives, could challenge this duopoly.
Impact on Circle and Coinbase
The announcement weighed heavily on Circle shares, reflecting investor concerns that Open USD could erode USDC's market position if adoption accelerates. Coinbase shares also declined, as the company shares revenue from USDC's reserve assets with Circle. For Coinbase, revenue tied to USDC forms an important part of its subscription and services business, which accounted for 44% of the company's total first-quarter revenue.
Circle CEO Jeremy Allaire sought to reassure investors, stating on X: "USDC remains the most trusted, widely adopted, institutional-ready stablecoin in the world, and we count thousands of institutions as partners in our ecosystem across nearly every major sector." He added that the company welcomes competition. A Coinbase spokesperson echoed this sentiment, emphasizing that "dollar-denominated stablecoins are a rising tide: more issuers, more use cases, and more distribution means more people using stablecoins. USDC remains a cornerstone of our platform."
Regulatory Tailwinds Support New Entrants
The launch of Open USD comes as US lawmakers move toward establishing clearer rules for stablecoins. The CLARITY Act is advancing toward a Senate vote, while the GENIUS Act has already set federal standards governing stablecoin reserves and licensing. This evolving regulatory framework is widely viewed as favorable for large, well-capitalized financial institutions with established compliance capabilities.
The White House also expressed support for the initiative. Patrick Witt, Executive Director of the President's Council of Advisers for Digital Assets, described the launch as "another example of how clear rules of the road can unlock massive value." He added, "What GENIUS did for stablecoins, the Clarity Act will do for all other digital assets."
For more on stablecoin market dynamics, see our analysis of Uniswap Gains 5% as Stablecoin Volume Dominance and Derivatives Data Signal Rally Potential. Additionally, the regulatory environment is evolving globally, as highlighted in Bank of England Finalizes Stablecoin Rules, Eases Asset Caps and Issuance Limits.
The stablecoin market is poised for increased competition, and investors will be watching closely to see how Circle and Coinbase respond to the Open USD challenge. The outcome could reshape the landscape of dollar-backed digital assets.
This article is for informational purposes only and does not constitute financial advice.
