The upcoming launch of Open Standard’s Open USD (OUSD) stablecoin could pose an “existential threat” to Circle’s USDC, but it depends on how things play out, a CoinShares analyst said Monday (July 13).
In a note posted Monday, CoinShares Senior Ethereum Research Associate Luke Nolan wrote that one of the potential strengths of OUSD is that it is backed by more than 140 partners. Another is that the stablecoin’s model plans to share reserve income with the partners that distribute it, minus a management fee.
“That is the main difference versus the existing stablecoin model, where the issuer keeps the reserve income (barring contractual distributions to partners, e.g., Coinbase-Circle,” Nolan wrote.
While this initially reads bearish for Circle, these factors are countered by the depth of Circle’s network of exchanges, decentralized finance (DeFi) venues, payments service providers (PSPs) and bank custody, which the company has been building for nearly a decade, and the fact that Circle could emerge from this challenge stronger if OUSD fails to gain ground, Nolan wrote.
OUSD is expected to launch in the second half of this year, according to the note.
“It is likely the market will continue to treat this situation with uncertainty, and new developments on the OUSD side could change this, whether for better or worse, for Circle,” Nolan wrote. “Until OUSD launches, the key things to watch are how USDC supply evolves, whether Circle adjusts its distribution economics, and what levers it can pull to combat what many now frame as an existential threat.”
Open Standard announced OUSD on June 30, saying the dollar-backed stablecoin is backed by more than 140 companies that include stakeholders from traditional payments and cryptocurrency-native ecosystems like Visa, Mastercard, Stripe, American Express, Coinbase, BlackRock, Google Cloud, BNY, IBM, DoorDash and Fireblocks.
The consortium said that rather than concentrating reserve economics on a single issuer, Open USD will allow participating institutions to mint and redeem the token without volume limits while sharing reserve income across the network after operating costs.
PYMNTS reported July 1 that the launch of OUSD is being positioned as a challenge to the concentrated economics of incumbent stablecoin issuers, including Circle, but also faces the unanswered question of who ultimately decides when the interests of the consortium diverge from those of its members.
PYMNTS CEO Karen Webster wrote July 8 that although Open Standard is billed as an independent consortium, its infrastructure is nearly all Stripe.
“That doesn’t make it less credible,” Webster wrote. “It makes it a serious, ambitious bet aimed at a real problem, placed by a company with a stake in every layer of the rail and enough distribution to seed adoption before the coin even goes live.”