OpenUSD Could Threaten Circle by Undermining Its Revenue Model

A stablecoin project backed by major US banks could disrupt Circle Internet Group Inc.'s revenue model, CoinShares said in a report.

Citing the report on July 15, CoinDesk said OpenUSD, or OUSD, could directly affect Circle's core profit engine.

Luke Nolan, an analyst at CoinShares, wrote that OUSD would share income from reserve assets with participating companies instead of allowing the issuer to keep all of it. If the project succeeds, he said, it could offer companies that use stablecoins more attractive economics and governance, accelerating adoption in mainstream payments.

OUSD is a dollar-based stablecoin being developed by Open Standard, a consortium of more than 140 companies including BlackRock, Coinbase, Mastercard, Stripe and Visa. It is set for launch in the second half of this year.

Nolan also said OUSD could affect the agreement between Circle and Coinbase. The two companies are due to renew their revenue-sharing deal on Aug. 18. Coinbase is understood to receive about half of the income generated from USDC reserves, and OUSD's emergence as an alternative could strengthen Coinbase's hand, he added.

Still, Nolan said market concerns about Circle may be somewhat overdone. OUSD has not yet launched, and key details including reserve-asset management and fees have not been disclosed. USDC continues to benefit from deep liquidity and the network it has built across exchanges, decentralized finance and payment services.

He said Tether's USDT would be relatively insulated from OUSD. Tether has a dominant position in emerging markets and offshore dollar liquidity, making it difficult for OUSD to pose a near-term threat.