Can Circle Defend Its Stablecoin Lead Against OpenUSD? Experts Weigh In

Circle is facing one of its biggest challenges following the announcement of Open USD (OUSD), a new stablecoin backed by major financial and payments companies, including Visa, Mastercard, American Express, BlackRock, and Coinbase. As speculation grew over what the new initiative could mean for USDC, Circle’s stock came under pressure, falling about 12.7% over the past five trading days.

While incumbents still control the vast majority of the market, industry experts believe OUSD could significantly reshape the competitive landscape. Alex Witt, General Partner at Verda Ventures, said that “distribution is king” and that value will accrue to built-in distribution networks. He noted that Circle, unlike Tether, does not own its primary distribution channels, evidenced by Circle sharing 90% of USDC reserve yield with Hyperliquid, demonstrating its weak competitive position. Witt believes OUSD could “dramatically erode” Circle’s first-mover advantage.

Bernardo Brites, co-founder and CEO of Trace Finance, described Open USD as “a real structural break” in the stablecoin market. He acknowledged that markets read the announcement as a direct threat to Circle, but also noted skeptics have flagged real execution risks, including bootstrapping liquidity from zero, lack of trading pairs against major crypto assets, governance friction from coordinating many stakeholders, and a thin fee model that could leave OUSD under-resourced. Even so, Brites argued that OUSD’s consortium is “bigger than anything the USDG consortium assembled,” referring to the consortium behind Paxos-issued USDG. “Getting the major card networks, processors like Adyen, and banks like BNY and Cross River behind a single stablecoin is unprecedented. Distribution has always been the hardest problem in stablecoins, and OUSD is launching with more of it than any issuer before.”

Circle CEO Jeremy Allaire pushed back against many of the arguments favoring the new stablecoin. In a tweet, Allaire said that stablecoin networks are platform and network effect businesses that tend towards “winner-take-most market structures,” suggesting that years of network building matter more than newly announced consortia. Responding to OUSD’s revenue-sharing model, he said Circle already shares the majority of its income with distribution partners, adding that “giving away all the income is a recipe for starving an infrastructure.” He remains skeptical of OUSD’s governance model and argued that the track record of consortium products achieving scale, product-market fit, or even basic product agility is “absolutely dismal.” “We actually tried this in the early days of USDC, and even with a very small group, ran into endless challenges and complexity.” While acknowledging the new entrant, Allaire said Circle’s partnership with Coinbase “remains as strong as ever” and expects many of OUSD’s founding members to remain USDC partners and customers.

Source: https://cryptopotato.com/can-circle-defend-its-stablecoin-lead-against-openusd-experts-weigh-in/