Institutional memory tends to go out the window when covering crypto’s innovations.
But the Tuesday (June 30) announcement that more than 140 companies spanning the payments, banking, asset management and cryptocurrency infrastructure spaces have joined a consortium called Open Standard to launch Open USD, or OUSD, a dollar-backed stablecoin, should have had at least some stakeholders feeing a sense of déjà vu.
The launch is being positioned as a challenge to the concentrated economics of incumbent stablecoin issuers, including Circle and Tether. Rather than allowing reserve income and network effects to accrue primarily to a single issuer, the OUSD consortium proposes distributing value across participants while allowing multiple institutions to mint and redeem a common digital dollar asset.
Conceptually, it is an attractive proposition; and, economically, the consortium’s members are attempting to solve one of stablecoins’ largest structural tensions: why should distribution partners spend billions helping another company become the dominant issuer?
Still, the history of financial services has repeatedly tested the value proposition of consortiums that win on both concept and economics but remain unproven on utility. And history suggests that ideas are rarely what determine whether industry consortiums succeed.
Open USD is entering that history before it ever enters the stablecoin market.
See more: Stablecoin Pilots Keep Stalling on the Road to Scale
The Financial Consortium Graveyard Is Full of Great Press Releases
The record of consortiums, rather than resting on the heft of their blue-chip backers, has been, as illuminated by hindsight, most frequently determined by governance. Who controls the agenda, how decisions are made, how capital is allocated and whether participants remain aligned once their commercial interests inevitably diverge is what can make or break a pilot initiative.
For example, when Facebook introduced Libra in 2019, the founding membership looked almost impossible to compete against. Global payments companies, technology platforms and venture investors appeared ready to build a new financial network together.
But as PYMNTS CEO Karen Webster noted at the time, the Libra announcement itself was not an operating company. It was a letter of intent among organizations that had not yet agreed on governance, obligations or economics. That observation translates almost directly to Open USD today.
The temptation is to read Open USD as though it already exists. In practical terms, it does not. What exists today is a coalition expressing a shared ambition to build a new form of stablecoin infrastructure. That distinction is more than semantic because it separates an announcement from an institution, and isolates the key takeaway from the announcement, which is that a large number of incumbent institutions believe the current stablecoin market deserves an alternative ownership model.
But every consortium begins with agreement on purpose. The challenge that quickly rears its head, at least historically, is that few begin with agreement on power and governance. A consortium cannot avoid governance simply because its members agree on the destination.
See also: Crypto Experts Tell PYMNTS Where Digital Assets Go Next
Shared Intent Is Not Shared Incentives
One feature distinguishes Open USD from many earlier industry alliances. Nearly every prominent participant already has another strategy. Stripe owns Bridge and continues building stablecoin infrastructure. Coinbase remains economically tied to USDC. Banks are investing in tokenized deposits. Payments companies increasingly support whichever digital assets customers choose to use rather than promoting a single issuer.
Those positions are not contradictory. They simply mean that membership in Open USD is additive rather than exclusive.
That reality makes governance considerably more important than the technology itself. Every significant commercial decision will require institutions to balance the interests of the consortium against businesses they already own, finance or depend upon. History suggests those tensions rarely emerge during the announcement phase. They emerge when capital must be committed and tradeoffs become unavoidable.
“We think of stablecoins as rails,” Mastercard Executive Vice President of Blockchain and Digital Assets Raj Dhamodharan told PYMNTS. “Each stablecoin can be thought of as a global ACH (automated clearing house), where the consumer doesn’t see the complexity.”
“The technology underneath this is quite powerful,” Dhamodharan said. “But that alone is not sufficient. To unlock the full value, really that orchestration needs to be provided.”
See also: Stablecoin Plans Split as Banks Go Their Own Way
Governance Is the Product Before the Stablecoin Is
The most important unanswered question surrounding Open USD is also the least technical. Not how the blockchain will operate, nor how reserve income will be distributed, but who ultimately decides when the interests of the consortium diverge from the interests of its members.
Governance is difficult to summarize in a launch announcement. Yet governance determines nearly every question that matters after launch. Who approves commercial partnerships? Who authorizes spending? How are conflicts between members resolved? Which companies influence product direction, and which merely participate?
Those questions remained unresolved when Libra was announced in 2019. They are the central question Open USD must answer today if it wants to change the financial infrastructure of tomorrow.