Mizuho turns bearish on stablecoin issuer Circle, citing Open USD competition

Japanese investment bank Mizuho downgraded Circle ( CRCL ) to underperform from neutral and slashed its price target to $50 from $85, arguing that OpenUSD's business model threatens the stablecoin issuer's long-term economics.

Circle shares were trading 0.6% lower at $62.63 at publication time.

Open USD , a dollar-backed stablecoin unveiled June 30 by the Open Standard consortium, "could fundamentally alter CRCL's business model, which relies on retaining a large portion of the treasury yield to drive revenues," analysts led by Dan Dolev said in the Tuesday note to clients.

The consortium counts more than 140 partners, including Mastercard (MA), Stripe, Coinbase (COIN) and BlackRock (BLK).

USDC has also lost momentum in recent months, with its circulating supply falling to about $73 billion from nearly $80 billion in March. The decline comes as the stablecoin market has shrunk by roughly $10 billion since May amid softer crypto trading activity and growing competition from newly regulated issuers.

Unlike Circle's USDC model, which captures reserve income before sharing a portion with partners such as Coinbase and Binance, Open USD charges a small operating fee and distributes most reserve income to issuers and distributors, the analysts said.

That model could pressure Circle's distribution partners to demand a larger share of reserve income over time, particularly as the company prepares to renegotiate its revenue-sharing agreement with Coinbase, its largest distribution partner, in August.

Coinbase's support for OpenUSD could strengthen its negotiating position, the report added.

Reflecting that risk, Mizuho raised its estimate for Circle's distribution and transaction costs in 2027 to 73% from 64%, cutting its adjusted EBITDA forecast to $699 million from $1.09 billion. The new estimate is roughly 25% below analyst consensus of $941 million.

While the bank now expects somewhat higher interest rates in 2027 than previously forecast, it said higher reserve yields would not be enough to offset pricing pressure.

The stablecoin issuer is facing other headwinds. Hyperliquid's deal with Circle and Coinbase creates a "prisoner's dilemma" that puts pressure on earnings from the dollar-pegged stablecoin, Wall Street bank JPMorgan said in a Tuesday research report.

Read more: JPMorgan says Hyperliquid's rise threatens Circle's USDC economics

CEX trading volumes rose for the first time in five months in June, with spot climbing 15.3% to $1.11T and RWA perpetual volumes surging to a record $311B.

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