Jefferies Advises Caution on Circle Stock Amid Open USD Consortium Threat to USDC

Jefferies has advised clients against buying Circle (CRCL) shares following a brief rebound, warning that growing competition from bank- and fintech-issued stablecoins — including the newly launched Open USD consortium — could weigh on USDC's supply growth and market share for the foreseeable future.

Circle shares recovered approximately 5% on Wednesday after a 17% plunge the prior session, as investors assessed whether the Open USD network poses a lasting threat to the USDC issuer. Jefferies analysts concluded that the selloff has not fully priced in the competitive risks. 'Buy the dip? We wouldn't,' the firm's analyst team wrote in a note to clients. 'CRCL headwinds are unlikely to ease,' they added.

The Open USD consortium counts more than 140 companies among its backers, including Stripe, Coinbase, Visa, Mastercard and BlackRock. A central feature of the network is a plan to share reserve income with participating firms, which Jefferies analysts said could make it a more attractive option for payment providers and fintechs compared with USDC.

Jefferies specifically flagged Coinbase's involvement as a material new risk for Circle. The company derives approximately 95% of its revenue from interest earned on USDC reserves and depends heavily on Coinbase as its largest distribution partner. The two companies' commercial agreement is reportedly up for renewal in August. While Jefferies does not view Coinbase's participation in Open USD as an imminent departure from USDC, it warned that the exchange could eventually direct users toward competing stablecoins.

Circle currently holds roughly 25% of the $300 billion global stablecoin market. USDC launched in 2018 and benefited from an early-mover advantage, but Jefferies argued that newer entrants now possess something Circle lacked in its early years: large, pre-existing distribution networks.

Circle CEO Jeremy Allaire responded to the competitive narrative in a lengthy post on X on Wednesday, contending that stablecoins are network businesses built over years and cannot be replicated quickly. He cited USDC's thousands of integrations, deep liquidity across exchanges and decentralized finance protocols, and regulatory approvals in markets including Europe and Japan as structural advantages that would be difficult for new rivals to match.

Allaire also pushed back on Open USD's reserve-sharing model. He noted that Circle already distributes the majority of its income to distribution partners while retaining enough revenue to fund infrastructure development. 'Giving away all the income is a recipe for starving an infrastructure,' he wrote. He was equally skeptical of the consortium structure itself, arguing that 'large groups of large companies coordinate poorly, have misaligned incentives, slow things down and rarely create the space for real durable innovation.'

Lorenzo Valente, director of digital asset research at ARK Invest, echoed that skepticism. Valente noted that the crypto industry has seen multiple consortium-backed stablecoin initiatives in recent years, including Meta's Diem project and the Paxos-led Global Dollar Network, none of which achieved significant scale. 'Every year we get our consortium-style initiative around a stablecoin,' Valente wrote on X. 'While the set of players here is obviously potent, I remain highly skeptical any of these initiatives can hit scale.'

Valente said the primary challenge for Open USD will be coordinating more than 140 participants with competing commercial interests. 'A consortium of hundreds of rivals has no precedent for working,' he said, adding that decision-making across competing firms would likely be 'glacial.' He compared the governance dynamics to those of decentralized autonomous organizations, or DAOs, which have historically struggled to reach timely decisions.