Circle stock slides as Open USD stablecoin challenges USDC dominance

Circle Internet Group shares fell sharply on Tuesday after a consortium of more than 140 financial, technology, and cryptocurrency companies unveiled plans to launch a new US dollar-backed stablecoin, raising concerns about increased competition in the fast-growing stablecoin market.

Circle CRCL stock dropped more than 16% in trading, while Coinbase Global shares also declined after the announcement.

Investors viewed the new initiative, called Open USD (OUSD), as a potential challenge to Circle's USD Coin (USDC), one of the world's largest dollar-backed stablecoins.

The project is being developed by Open Standard and is backed by a broad coalition that includes Visa, Mastercard, Stripe, BlackRock, Bank of New York Mellon, Coinbase, Alphabet's Google, IBM, Klarna, American Express, Standard Chartered, BBVA, DBS, Shopify, SoFi, Adyen, Gemini, Galaxy, Ripple, Crypto.com, and Polygon.

Notably absent from the consortium are Circle, Tether, and PayPal.

Open USD aims to challenge established stablecoins

Open Standard said Open USD will launch later this year and that more than 140 businesses have joined the initiative.

Stablecoins are cryptocurrencies whose value is typically pegged to the US dollar and backed by assets such as bank deposits or US Treasury securities.

USDC, which was co-founded by Circle and Coinbase, has long been the largest US-based stablecoin, with approximately $73.6 billion in circulation as of Tuesday.

Open Standard said the stablecoin will allow users to mint and redeem tokens at no cost.

The company added that nearly all income generated from the reserves backing the token, after deducting a small management fee and operational expenses, will be distributed among participating companies that adopt and help expand the network.

The revenue-sharing structure differs from existing models used by major stablecoin issuers such as Circle and Tether, which retain most of the reserve income generated by their tokens.

Investors assess impact on Circle and Coinbase

The announcement weighed heavily on Circle shares, reflecting concerns that Open USD could erode USDC's market position if adoption accelerates.

Circle and Coinbase currently share revenue generated from USDC's reserve assets.

For Coinbase, revenue tied to USDC forms an important part of its subscription and services business, which accounted for 44% of the company's total first-quarter revenue.

Circle Chief Executive Officer Jeremy Allaire sought to reassure investors following the announcement.

"USDC remains the most trusted, widely adopted, institutional-ready stablecoin in the world, and we count thousands of institutions as partners in our ecosystem across nearly every major sector," Allaire wrote in a post on X, adding that the company welcomes competition.

A Coinbase spokesperson also emphasized the company's continued support for USDC, saying, "Coinbase's view has always been that dollar-denominated stablecoins are a rising tide: more issuers, more use cases, and more distribution means more people using stablecoins. USDC remains a cornerstone of our platform."

Regulatory backdrop supports new entrants

The Open USD launch comes as US lawmakers move toward establishing clearer rules for stablecoins.

The CLARITY Act is advancing toward a Senate vote, while the GENIUS Act has already established federal standards governing stablecoin reserves and licensing.

The evolving regulatory framework is widely viewed as favorable for large, well-capitalized financial institutions with established compliance capabilities.

The initiative also received support from the White House administration.

Patrick Witt, Executive Director of the President's Council of Advisers for Digital Assets, described the launch as "another example of how clear rules of the road can unlock massive value." He added, "What GENIUS did for stablecoins, the Clarity Act will do for all other digital assets."

Together, Circle's USDC and Tether's USDT account for roughly 80% of the more than $300 billion global stablecoin market, making Open USD one of the most significant competitive efforts to emerge in the sector.