The investment bank said new competition from the Stripe- and Coinbase-backed stablecoin consortium could pressure USDC's growth.

• Circle shares were higher on Wednesday after Tuesday's plunge, but Jefferies warned that rising competition from bank- and fintech-issued stablecoins, including the new Open USD consortium, could pressure USDC’s growth and market share.
• The Open USD network, backed by more than 140 firms such as Stripe, Coinbase, Visa, Mastercard and BlackRock, aims to share reserve income with participants, potentially making it an attractive alternative for payment providers.
• Circle CEO Jeremy Allaire and ARK Invest’s Lorenzo Valente questioned whether a large consortium can coordinate effectively and withstand regulatory pressure, arguing that USDC’s existing network effects and regulatory footprint give it an edge over new rivals.

Circle (CRCL) shares bounced 5% Wednesday after a 17% plunge, as investors are weighing whether the new Open USD stablecoin consortium backed by Stripe, Mastercard, Coinbase and BlackRock poses a lasting threat to the USDC issuer.

Global brokerage Jefferies isn't convinced the selloff has fully priced in the risks, arguing that Circle faces mounting competitive pressure as banks, payment firms and fintechs increasingly launch their own stablecoins.

"Buy the dip? We wouldn't," the firm's analyst team wrote in a note to clients.

"CRCL headwinds are unlikely to ease," analysts wrote, warning that competition could pressure USDC's supply growth and market share.

The authors argued that Circle, which holds roughly 25% of the $300 billion stablecoin market, is moving into a more competitive phase. While USDC benefited from an early lead after launching in 2018, Jefferies said new entrants now have something Circle lacked in its early years: large built-in distribution networks.

The launch of Open USD, backed by more than 140 companies including Stripe, Coinbase, Visa, Mastercard and BlackRock, points that shift. The consortium plans to share reserve income with participating companies, potentially making the platform more attractive to payment providers and fintechs.

Jefferies analysts also flagged Coinbase's participation as a new risk. Circle derives about 95% of its revenue from interest earned on USDC reserves and relies heavily on Coinbase as its largest distribution partner. The companies' commercial agreement is reportedly up for renewal in August.

While the brokerage doesn't view Coinbase joining Open USD as a sign it's abandoning USDC, it said the exchange could eventually promote competing stablecoins, weighing on USDC's growth.

Network effects vs. new challengers

Circle CEO Jeremy Allaire pushed back against the competitive narrative in a lengthy post on X Wednesday, arguing that stablecoins are ultimately network businesses built over years rather than products that can be replicated overnight.

He pointed to USDC's ecosystem of thousands of integrations, deep liquidity across exchanges and decentralized finance protocols and regulatory approvals in markets including Europe and Japan as advantages that would be difficult for newcomers to match.

He also disputed one of Open USD's central selling points: sharing reserve income with partners. Circle already shares the majority of its income with distribution partners, he said, while retaining enough revenue to keep investing in infrastructure.

"Giving away all the income is a recipe for starving an infrastructure," Allaire wrote.

He was also skeptical of the consortium model itself.

"Large groups of large companies coordinate poorly, have misaligned incentives, slow things down and rarely create the space for real durable innovation," he wrote.

Test for the consortium model

That skepticism is shared by Lorenzo Valente, director of digital asset research at ARK Invest, who noted that crypto has seen several consortium-backed stablecoin initiatives over the years, including Meta's Diem project and Paxos-led Global Dollar Network.

"Every year we get our consortium-style initiative around a stablecoin," Valente wrote in an X post. "While the set of players here is obviously potent, I remain highly skeptical any of these initiatives can hit scale."

He said Open Standard's biggest challenge may be coordinating more than 140 participants with competing interests.

"A consortium of hundreds of rivals has no precedent for working," he said. "The pace of decision-making across competitors is going to be glacial."

Valente likened the model to decentralized autonomous organizations, or DAOs, whose governance structures often struggled to make timely decisions.

"'Owned by everyone' almost always means accountable to no one," he said. "I'd bet on the two operators who can ship unilaterally over a committee that has to ask hundreds of rivals for permission."

He also questioned whether large banks, payment networks and technology companies would remain committed if the project encounters regulatory pressure. Circle and Tether, he noted, have spent years building global regulatory infrastructure and licensing, while a consortium could find it harder to stay aligned if conditions become more challenging.

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