Mizuho Says Clarity Act May Weigh on Circle Over Time as USDC Competition Rises

Mizuho says the Clarity Act, a US crypto market structure bill, could hurt Circle over the long term.

The Block reported on July 22 that Mizuho analysts wrote in a research note that the bill would open the door to more institutional competitors in the stablecoin market and further commoditize Circle's USDC product.

A team led by Mizuho analyst Dan Dolev said the regulatory clarity provided by the Clarity Act would intensify competition in stablecoins and eventually erode Circle's earnings. Mizuho has also said OpenUSD, a new dollar-pegged stablecoin project being pushed by a consortium of more than 140 financial, technology and crypto companies including Visa, Mastercard, Stripe, BlackRock and Coinbase, poses a significant threat to Circle's revenue.

Mizuho also highlighted a fundamental difference in the two projects' revenue models. Circle retains about 38% of the income from USDC reserves after sharing revenue with partners including Coinbase and Binance. OpenUSD, by contrast, uses a pass-through model that gives most reserve income to distributors and charges only a small management fee.

Coinbase's backing of OpenUSD adds to the pressure on Circle. Mizuho wrote that Coinbase, the largest distributor of USDC, has gained greater leverage in its next revenue-sharing negotiation with Circle by supporting OpenUSD. The distribution agreement between the two companies could be renegotiated as early as next month.

Separately, the Clarity Act moved a step closer to a full Senate vote on July 22 after Republicans released the latest text of the bill. A vote could come as soon as next week, though ethics-related issues may complicate efforts to secure the support needed for Senate passage. Mizuho maintained its $50 price target on Circle. Circle shares were trading at about $67 on the day, down about 6% from the previous session.