OpenUSD Could Threaten Circle by Shaking Up Its Revenue Model

A stablecoin project being developed by major US financial companies could disrupt Circle’s revenue structure, according to a CoinShares analysis.

CoinShares said in a report cited by CoinDesk on July 15 that OpenUSD, or OUSD, could directly affect Circle’s core revenue model.

Luke Nolan, an analyst at CoinShares, wrote that OUSD would distribute reserve income among participating companies rather than follow the traditional model in which the issuer keeps that revenue. If OUSD succeeds, it could offer companies that use stablecoins more attractive economics and governance. That, in turn, could accelerate stablecoins’ expansion into the mainstream payments market.

OUSD is a dollar-backed stablecoin being developed by Open Standard, a consortium of more than 140 companies including BlackRock, Coinbase, Mastercard, Stripe and Visa. The token is set to launch in the second half of this year.

Nolan also said OUSD could affect the agreement between Circle and Coinbase. The companies are due to renew their revenue-sharing contract on Aug. 18. Coinbase is currently understood to receive about half of the income generated from USDC reserves. If OUSD emerges as an alternative, Coinbase could gain more leverage.

Still, Nolan said investor concerns about Circle may be somewhat overdone. OUSD has not yet launched, and key details including reserve management and fees have not been disclosed. USDC continues to benefit from deep liquidity and the network it has built across exchanges, decentralized finance and payment services.

Nolan said Tether’s USDT would likely be less exposed to pressure from OUSD. Tether has established a dominant position in emerging markets and offshore dollar liquidity markets, making it difficult for OUSD to pose a near-term threat.