Circle stock climbed 5% on Wednesday, a day after dropping 17% when the Open USD stablecoin consortium was announced. Investors are now trying to figure out whether the selloff went too far — or not far enough.
Jefferies is in the “not far enough” camp. The investment bank told clients Wednesday it would not recommend buying the dip in Circle, saying the competitive risks facing USDC have not been fully priced into the stock.
“CRCL headwinds are unlikely to ease,” the firm wrote.
Open USD launched with backing from more than 140 companies, including Stripe, Coinbase, Visa, Mastercard and BlackRock. The consortium plans to share reserve income with participating companies, which could make it more attractive to payment providers and fintechs looking to enter the stablecoin space.
Circle currently holds around 25% of the $300 billion stablecoin market. USDC launched in 2018 and built its position through a first-mover advantage. Jefferies argues new entrants now have something Circle didn’t back then: large, ready-made distribution networks.
One of the more specific risks Jefferies flagged is Circle’s dependence on Coinbase. Circle generates roughly 95% of its revenue from interest on USDC reserves, and Coinbase is its largest distribution partner by far.
The commercial agreement between the two companies is reportedly up for renewal in August. Jefferies said it doesn’t see Coinbase abandoning USDC entirely, but noted the exchange could start promoting competing stablecoins, which would weigh on USDC’s growth.
Circle CEO Jeremy Allaire addressed the competition narrative directly on X Wednesday. He argued that stablecoins are network businesses built over years, not products that can be copied quickly.
Allaire pointed to USDC’s thousands of integrations across exchanges and DeFi protocols, along with regulatory approvals in Europe and Japan, as moats that are difficult to replicate fast.
He also took a shot at the consortium model itself. “Large groups of large companies coordinate poorly, have misaligned incentives, slow things down and rarely create the space for real durable innovation,” he wrote.
That skepticism extends beyond Jefferies. Lorenzo Valente, director of digital asset research at ARK Invest, noted that crypto has seen consortium-style stablecoin projects before — Meta’s Diem and the Paxos-led Global Dollar Network among them — and none hit meaningful scale.
“Every year we get our consortium-style initiative around a stablecoin,” Valente wrote on X.
He said coordinating over 140 companies with competing interests would be slow by nature, comparing it to DAO governance structures that often struggled to make timely decisions. He also questioned whether large banks and tech companies would stay aligned if the project ran into regulatory pressure.
Valente’s view: bet on operators who can move independently rather than a committee needing approval from hundreds of rivals.
The commercial renewal between Circle and Coinbase in August is now one of the more closely watched events in the stablecoin space.
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