Investment Bank Says USDC Faces Growing Competitive Pressure From Open USD Consortium
Wall Street investment bank Jefferies has advised investors against buying the recent decline in Circle Internet Groupshares, arguing that the launch of the Open USD (OUSD) consortium could create lasting headwinds for the company’s flagship stablecoin, USDC.
The warning follows a sharp selloff in Circle’s stock after Open USD was unveiled by a consortium backed by more than 140 companies, including major financial and technology firms. Although Circle shares rebounded modestly after the initial decline, Jefferies believes the market may still be underestimating the competitive risks facing the stablecoin issuer.
“Buy the Dip? We Wouldn’t,” Jefferies Says
In a research note to clients, Jefferies analysts took a cautious stance on Circle’s outlook, stating that the recent share-price weakness does not yet present an attractive buying opportunity.
The brokerage argued that Circle is entering a significantly more competitive stablecoin market, where banks, payment companies, fintech firms, and crypto platforms are increasingly launching their own dollar-backed digital assets.
“Buy the dip? We wouldn’t,” Jefferies wrote, warning that Circle’s headwinds are unlikely to ease as competition intensifies. The firm expects the new environment to weigh on both USDC supply growth and its overall market share.
Open USD Consortium Could Challenge USDC’s Distribution Advantage
One of Jefferies’ primary concerns is the scale of the newly launched Open USD ecosystem.
The Open USD network is backed by more than 140 organizations, including Stripe, Coinbase, Visa, Mastercard, and BlackRock. Unlike traditional stablecoin issuers, the consortium plans to share reserve income with participating partners, creating a financial incentive for payment providers and fintech platforms to adopt Open USD instead of competing products.
According to Jefferies, Circle enjoyed a first-mover advantage when USDC launched in 2018. Today, however, new entrants are bringing extensive customer bases and established payment networks that could accelerate adoption of competing stablecoins.
Coinbase Relationship Also Under Scrutiny
Jefferies also highlighted Circle’s close commercial relationship with Coinbase as another area investors should monitor.
Circle generates the vast majority of its revenue from interest earned on reserves backing USDC, while Coinbase serves as one of the token’s largest distribution partners. The existing commercial agreement between the two companies is reportedly due for renewal later this year.
Although Jefferies does not believe Coinbase intends to abandon USDC, analysts suggested that the exchange’s participation in the Open USD consortium could eventually diversify its stablecoin strategy, potentially reducing USDC’s competitive advantage over time.
Circle Pushes Back Against Competitive Concerns
Circle Chief Executive Jeremy Allaire has downplayed concerns that Open USD will significantly disrupt USDC’s position.
Allaire argued that stablecoins benefit from long-term network effects that cannot easily be replicated through consortium membership alone. He also pointed to blockchain data showing that USDC continues to account for a substantial share of on-chain stablecoin transaction activity, suggesting the token maintains a strong competitive position despite new entrants.
Several market observers, including ARK Invest, have similarly questioned whether a large consortium with numerous stakeholders can maintain coordinated governance over the long term.
Stablecoin Competition Enters a New Phase
The emergence of Open USD signals a broader shift in the stablecoin industry as traditional financial institutions, payment networks, and fintech companies increasingly compete for market share.
For years, USDC and Tether (USDT) have dominated the sector. However, analysts believe new consortium-backed models that share reserve income with partners could reshape how stablecoins are distributed and monetized.
Whether Open USD can meaningfully erode USDC’s leadership remains uncertain, but Jefferies believes investors should prepare for a more competitive environment than Circle has previously faced.
Key Takeaways
- Jefferies advised investors not to buy the recent dip in Circle shares.
- The bank believes the Open USD consortium could pressure USDC’s market share and supply growth.
- Open USD is backed by more than 140 companies, including Stripe, Coinbase, Visa, Mastercard, and BlackRock.
- Jefferies also highlighted uncertainty surrounding Circle’s commercial relationship with Coinbase.
- Circle CEO Jeremy Allaire maintains that USDC’s network effects and established ecosystem provide a durable competitive advantage despite the arrival of new rivals.
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