Why OpenUSD's 'real threat' that tanked Circle stock still faces a steep uphill battle for adoption

Circle shares slump after OpenUSD launch

Circle shares (CRCL) cratered on Tuesday after the new Open USD stablecoin network rattled investors, but analysts say it's too early to conclude the consortium poses a serious threat to USDC.

The Open Standard, backed by more than 140 companies including Stripe, Coinbase, Visa, Mastercard and BlackRock, immediately attracted attention because it attacks one of Circle's key advantages: its network of institutional partners. Some went as far as to call it an "existential threat" to Circle, whose business model relies primarily on retaining the interest earned on the assets backing USDC. OUSD, by contrast, would distribute that yield to partners rather than keep it for the issuer.

"The marquee partner names clearly suggest a real threat to Circle's business," Rob Hadick, general partner at venture capital firm Dragonfly, told CoinDesk. He added that Stripe's broad suite of financial products could give the consortium an edge by allowing it to "uniquely undercut Circle's economics."

Analysts call selloff an overreaction

Others are more cautious in their take, at least for now. "It has a strong line-up on paper, which will impact the near-term sentiment of CRCL until OUSD is launched later this year," Clear Street managing director Owen Lau said. Still, he argued that Circle's 16% selloff on Tuesday went too far. "I think it is an overreaction," he told CoinDesk.

He pointed to Paxos' Global Dollar Network (USDG), another consortium-backed stablecoin that shares reserve income with partners but has yet to gain significant market share. It has grown to a $3 billion supply since its launch in late 2024, lagging far behind USDC's $73 billion and USDT's $145 billion, according to CoinDesk data.

"The bigger question is how OUSD can convince consumers and end users to adopt them," Lau said. "We don't really know the answer until it is fully launched so that we can gauge the market cap and usage."

Hadick also cautioned that building an industry consortium is rarely straightforward. "Consortiums are hard and they break easily," he said. "Incentives are broad and often misaligned."

"So while the [Circle] stock selloff seems clearly reasonable, I also don't expect this to be an easy or straightforward road for Open Standard and expect it to be harder to get to scale than expected," Hadick added.

Details still missing

Others cautioned that the announcement left several important questions unanswered. Noelle Acheson, author of the Crypto Is Macro Now newsletter, said Open Standard has assembled an impressive list of partners and is led by Bridge co-founder Zach Abrams, "who knows what he's doing."

"But the release is vague on some key issues," she wrote, pointing to unanswered questions around:

• Open Standard's ownership structure
• The licensing framework for the issuer
• Which blockchains Open USD will launch on
• How reserve income will be distributed among partners

Omid Malekan, an adjunct professor at Columbia Business School, argued that the announcement reflects what he called the "logo spray and pray" phase of stablecoin adoption. "Putting your name on a list is easy," he wrote on X. "Actually changing corporate behavior (and business models) is hard."

The key question, he argued, is whether stablecoins can improve participants' bottom lines.

Coinbase-Circle relationship

The announcement also put fresh focus on Circle's relationship with Coinbase. The two companies jointly founded the Centre Consortium that started USDC issuance and continues to share economics tied to the stablecoin's reserve income under a commercial agreement. That deal is reportedly up for renewal in August.

Dragonfly general partner Omar Kanji suggested the announcement makes a potential breakup between Circle and Coinbase appear more plausible, though he ultimately expects the companies to renew their agreement with revised economics while continuing to compete in some areas.

Luca Prosperi, CEO of M0 Foundation, viewed Open USD as another sign that the stablecoin market is moving away from winner-take-all dynamics. "The future is resisting Circle's monopoly," he wrote, describing the consortium as "Global Dollar on Stripe's execution engine" while arguing that "nothing changes for the long-term thesis."

Shifting stablecoin competition

The debate also highlights how investors may need to rethink exposure to the stablecoin sector. Jeff Dorman, CIO of investment firm Arca, argued that the opportunity extends beyond issuers such as Circle and Tether to the exchanges, payment firms, wallets, custodians and blockchain networks that distribute and settle digital dollars.

As stablecoins move deeper into mainstream finance, he said, those distribution channels may ultimately prove to be the bigger winners. "The stablecoin opportunity extends far beyond Circle, Tether, or any single issuer," he told CoinDesk.

"Investors often ask what the next trillion-dollar blockchain use case will be," he said. "Increasingly, the answer appears to be money itself, but it's challenging to find the best pure play way to invest in this."