Circle shares shed nearly a fifth of their value in a single session this week after a consortium of 140 companies, including payments giants Visa and Mastercard, announced plans to launch a competing stablecoin called Open USD. The 17.55% drop marks the steepest one-day decline since Circle went public, and it arrived with a pointed message from CEO Jeremy Allaire: network effects take years to build, and giving away all your revenue might sound generous until the infrastructure collapses.
The stablecoin market has operated as a de facto duopoly for years. Tether (USDT) commands the largest market cap, recently flipping Ethereum for the number-two spot across all crypto assets. USD Coin (USDC) trails in market cap but has been gaining ground in monthly transfer volume, overtaking USDT in flows earlier this year. Now Open Standard wants to redraw that map entirely, and it has assembled a partner list that reads like a who’s who of global finance and tech.
The Consortium Challenging Circle and Tether
Open Standard announced Open USD (OUSD) on Tuesday with backing from Visa, Mastercard, Stripe, Coinbase, BlackRock, and Google, among others. The breadth of support is remarkable: payments processors, card networks, asset managers, crypto exchanges, and cloud infrastructure providers all signed onto the same initiative. The stablecoin is expected to go live later in 2026, though specific launch timing remains unconfirmed.
The business model differs sharply from how Circle and Tether operate today. OUSD promises free, unlimited minting and redemption, meaning businesses can move in and out of the stablecoin without transaction fees. More controversially, the consortium plans to return nearly all reserve income to partners rather than keeping it as issuer revenue. Those reserves, invested in short-term instruments like Treasury bills, generate significant yield. Tether alone reported over $6 billion in profits for 2024, largely from reserve interest.
Bernstein analysts wasted no time weighing in. In a research note, they called OUSD potentially the “strongest and first new entrant to challenge the duopoly of Circle and Tether,” citing its reach across payments, banking, technology, and commerce. That’s a meaningful statement from a firm that initiated coverage of Circle just months ago with a $190 price target and outperform rating, calling USDC adoption a structural growth story decoupled from crypto’s boom-bust cycles.
Still, Bernstein flagged substantial unresolved questions. Governance among 140 partners will require significant coordination. The operational architecture remains undefined. And the revenue-sharing formula that sounds attractive on paper needs to survive contact with reality. Coordinating that many stakeholders, each with their own strategic interests, is an organizational challenge that shouldn’t be underestimated.
Allaire’s Defense: Network Effects and Infrastructure Economics
Jeremy Allaire responded within hours. In a Wednesday post on X, the Circle CEO framed stablecoin networks as platform businesses where competitive moats emerge from sustained investment over time. Integrations with wallets, exchanges, and payment processors. Deep liquidity pools across trading pairs. Regulatory approvals in multiple jurisdictions. Banking relationships that provide on-ramps and off-ramps. Reserve management infrastructure that can handle billions in daily flows.
“Sustained investment in integrations, liquidity, regulatory approvals, banking relationships and reserve management creates competitive advantages that are difficult to replicate,” Allaire wrote. USDC has been building that foundation for roughly a decade. A new entrant, regardless of how impressive its partner list, starts from zero.
Allaire also questioned OUSD’s economics directly. Would permanently offering free, unlimited minting and redemption remain sustainable at scale? The implication: zero transaction fees work when volumes are low, but processing and compliance costs don’t disappear as usage grows. Someone has to pay for the infrastructure.
His sharpest critique targeted the revenue-sharing model. Returning nearly all reserve income to partners, Allaire argued, risks “starving an infrastructure.” Circle spent close to $500 million on marketing, infrastructure, technology, and compliance last year, according to Bernstein’s estimates. That spending isn’t optional. Stablecoin issuers face audits, reserve attestations, regulatory examinations, banking partner requirements, and the constant maintenance of integrations across hundreds of platforms. If you give away all your revenue, where does that money come from?
The question has real teeth. OUSD’s model sounds attractive to partners who currently receive nothing (or very little) from Tether and Circle. But a stablecoin that cannot invest in its own operations becomes a liability to the very partners it’s trying to court. Downtime, security incidents, or regulatory failures would affect every company in the consortium.
The Cold-Start Problem and Competing Loyalties
Lorenzo Valente, director of research at ARK Invest, offered a more skeptical perspective. In a post on X, Valente pointed to what he called the cold-start problem. USDC and USDT have entrenched liquidity across the crypto ecosystem. They’re quoted in countless trading pairs. They’re the default settlement layer for DeFi protocols. They’re integrated into every major exchange. That liquidity creates network effects that compound over time.
Valente characterized the OUSD announcement as a “giant” letter of intent rather than a concrete product launch. The distinction matters. A letter of intent signals interest but not commitment. Many of the 140 partners also support competing stablecoins or operate their own infrastructure. That creates potential conflicts.
“The partners are backing rivals: Stripe owns Bridge and has its own stack, Coinbase is wedded to USDC, banks are building their own deposit tokens and the card networks support every token out there,” Valente wrote. In other words, these companies didn’t sign up to abandon their existing stablecoin relationships. They signed up to have options.
Coinbase’s presence on the partner list is particularly interesting. The exchange has been one of USDC’s most important distribution partners, and Circle’s S-1 filing revealed the revenue-sharing agreement between the two companies. Coinbase joining OUSD doesn’t mean it will stop supporting USDC, but it does mean Coinbase wants negotiating leverage and optionality. If OUSD can offer better economics, Coinbase can threaten to shift its promotional weight.
Visa and Mastercard face similar strategic calculations. Both card networks have supported multiple stablecoins for years. Their participation in OUSD isn’t an endorsement of one winner; it’s a hedge against being locked out of whatever stablecoin infrastructure eventually dominates.
What the Market Priced In (and What It Might Have Missed)
Circle shares closed Tuesday at $62.63, down 17.55% from the previous session. That’s a significant move for a company with the regulatory credentials and market position Circle has built. By Wednesday premarket trading (as of 11 am UTC), shares had recovered 2.44% to $64.18, suggesting some investors viewed the selloff as an overreaction.
The stock reaction deserves context. Bernstein’s $190 price target, issued in March, implied Circle would capture an outsized share of stablecoin growth as regulatory clarity improves. The GENIUS Act debate in Congress has centered on whether stablecoin issuers can pay yield to holders, a question JPMorgan CEO Jamie Dimon has warned could reshape the competitive landscape depending on how legislators resolve it.
OUSD’s emergence complicates that thesis. If a consortium of 140 companies can launch a viable alternative, Circle’s growth trajectory becomes less certain. The company would need to defend market share rather than simply expand into new territory.
That said, a 17.55% selloff prices in substantial probability that OUSD succeeds. The stablecoin doesn’t exist yet. Governance structures remain undefined. The revenue-sharing formula hasn’t been finalized. And the partners include companies with divergent interests that could slow decision-making to a crawl. Committee-designed products rarely move quickly.
Consider the operational complexity. Running a stablecoin at scale requires 24/7 treasury operations, real-time reserve management, banking relationships that can process redemptions on weekends, compliance teams that satisfy regulators across dozens of jurisdictions, and engineering teams that maintain integrations with hundreds of platforms. Circle spent a decade building that. OUSD is starting from scratch with a governance structure that requires consensus among 140 stakeholders.
The Stablecoin Market Structure Underneath
Zooming out, the OUSD announcement reflects a broader tension in stablecoin market structure. Issuers like Circle and Tether capture the interest income from reserves while partners (exchanges, wallets, payment processors) do much of the distribution work. That arrangement has always created friction. Partners want a larger share of the economics. Issuers argue they need the revenue to fund operations and compliance.
OUSD attempts to flip that dynamic by making partners into stakeholders who share directly in reserve income. The approach mirrors how some DeFi protocols distribute token emissions to liquidity providers. It’s attractive to partners who feel undercompensated by the current system.
But there’s a reason traditional businesses don’t operate this way. Revenue concentration allows for operational investment. Distributing nearly all income to partners leaves minimal margin for the issuer to reinvest in infrastructure, hire compliance staff, or weather regulatory challenges. The model assumes partners will collectively provide the resources needed to keep the stablecoin running. That’s a coordination problem no consortium of 140 companies has solved before.
The cold-start problem Valente identified compounds the challenge. Liquidity begets liquidity. Traders prefer stablecoins quoted in the most pairs. DeFi protocols integrate stablecoins with the deepest pools. Exchanges list stablecoins their customers already hold. USDC and USDT benefit from a flywheel that took years to build. OUSD would need to bootstrap that flywheel from zero while simultaneously coordinating 140 partners with conflicting interests.
Circle’s spending figures offer a reality check. Nearly $500 million annually on marketing, infrastructure, technology, and compliance isn’t overhead that can be eliminated. It’s the cost of operating a stablecoin at scale. If OUSD distributes most of its revenue to partners, it needs another funding mechanism for those expenses. Partner contributions? Governance tokens? Some form of fee that contradicts the “free minting and redemption” promise?
The announcement didn’t answer those questions, and until it does, OUSD remains more concept than competitor.
What Happens When the Stablecoin Goes Live
OUSD’s planned launch later in 2026 will test whether a consortium-driven model can overcome the incumbency advantages Allaire described. Several scenarios could play out.
In the bullish case for OUSD, the partner network creates instant distribution. Visa, Mastercard, and Stripe integrate the stablecoin into their payment rails. Coinbase lists it prominently. BlackRock provides institutional credibility. The sheer breadth of support generates enough adoption momentum to overcome the cold-start problem. Circle loses market share, and the duopoly becomes a triopoly.
In the bearish case, governance disagreements slow development. Partners prioritize their own stablecoin infrastructure over the consortium’s. The revenue-sharing model proves unsustainable as operational costs rise. OUSD launches to modest adoption and gradually fades as Circle and Tether continue executing.
The most likely outcome probably falls somewhere in between. OUSD launches with meaningful adoption from partners who want alternatives to Circle and Tether. It captures some market share, particularly in payments use cases where Visa and Mastercard have direct influence. But it doesn’t dethrone the incumbents because liquidity network effects in crypto trading remain sticky.
For investors, the question is whether a 17.55% selloff appropriately prices that middle scenario. Circle’s regulatory moat, existing integrations, and decade of infrastructure investment don’t evaporate because a consortium filed a letter of intent. But the competitive landscape has shifted. Tracking stablecoin flows through our market dashboard will show how adoption actually evolves once OUSD goes live.
The stablecoin wars have a new entrant. Whether it becomes a genuine challenger or a cautionary tale about governance-by-committee won’t be clear until the product ships and faces the market’s verdict.
Related Reading
Source Material
- https://cointelegraph.com/news/circle-ceo-challenges-ousd-revenue-sharing-governance?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound
- https://cointelegraph.com/news/circle-ceo-challenges-ousd-revenue-sharing-governance
- https://finance.yahoo.com/quote/CRCL/
Disclaimer: This is journalism, not investment guidance. Crypto is risky. Make your own informed decisions.
