Mizuho Says Clarity Act May Hurt Circle Long Term as USDC Competition Intensifies
Summary
- Mizuho said the Clarity Act could have a negative long-term effect on Circle by intensifying competition in the stablecoin market.
- Mizuho said OpenUSD's revenue model and support from Coinbase pose a significant threat to Circle's revenue from USDC.
- Mizuho maintained its price target for Circle at $50, while Circle shares fell about 6% from the previous day to around $67.
Forecast Trend Report by Period
Mizuho said the US crypto market structure bill known as the Clarity Act could hurt Circle over the long term.
The Block reported on July 22 that Mizuho analysts wrote in a research note that the Clarity Act would open the door for more institutional competitors to enter the stablecoin market, making Circle's USDC more of a commodity product.
A team led by Mizuho analyst Dan Dolev said the regulatory clarity provided by the Clarity Act could intensify competition in the stablecoin market and ultimately erode Circle's earnings. Mizuho has previously said OpenUSD, a new dollar-pegged stablecoin project backed by a consortium of more than 140 financial, technology and crypto companies including Visa, Mastercard, Stripe, BlackRock and Coinbase, also poses a significant threat to Circle's revenue.
Mizuho also said OpenUSD's revenue model differs fundamentally from Circle's. Circle retains about 38% of income from USDC reserves after sharing revenue with partners including Coinbase and Binance. OpenUSD, by contrast, uses a pass-through model that hands most reserve income to distributors and takes only a small management fee.
Coinbase's support for OpenUSD adds to the pressure on Circle. Mizuho said Coinbase, the largest distributor of USDC, has gained more leverage in its next revenue-sharing negotiations with Circle by backing OpenUSD. The distribution agreement between the two companies could be renegotiated as soon as next month.
Separately, the Clarity Act moved a step closer to a full Senate vote on July 22 after Republicans released the latest text of the bill. A vote could come as soon as next week, though some ethics-related issues may complicate efforts to secure the support needed for Senate passage. Mizuho maintained its $50 price target on Circle. Circle shares were about $67 on the day, down about 6% from the previous session.
