Circle (CRCL) faces a rating downgrade: Is the rise of Open USD reshaping the stablecoin competition landscape?

Beijing time on July 15, 2026, Circle Internet Group (NYSE: CRCL) closed at $63.22, up slightly by 0.35% for the day, after briefly dipping to a low of $59.29 during the session. Over the past year, CRCL has fallen 67.63% in total, retreating about 78.8% from its 52-week high of $298.99. Just the day before, Mizuho, a Japanese investment bank, downgraded Circle’s rating from “Neutral” to “Underperform,” cutting its target price sharply from $85 to $50. On the same day, JPMorgan also lowered its earnings forecasts for Circle and Coinbase.

The two bearish reports from Wall Street point to the same core variable—Open USD (OUSD).

Why Mizuho’s downgrade matters: How does Open USD threaten Circle’s business model?

In its report, Mizuho analyst Dan Dolev explicitly noted that Open USD’s business model “could fundamentally change Circle’s business model, which relies on retaining most of the Treasury yield to drive revenue.”

To understand this assessment, you first need to break down Circle’s profit structure. Circle’s core business is highly single-minded: users deposit dollars to mint USDC, and Circle invests all reserves into short-term U.S. Treasuries to earn the spread. After splitting with distribution partners such as Coinbase and Binance, Circle effectively retains about 38% of reserve earnings. In fiscal year 2025, Circle’s total revenue was $2.75B, but distribution costs paid to Coinbase exceeded $900 million per year.

Open USD takes the opposite approach. Governed by the Open Standard consortium, OUSD allocates the vast majority of reserve earnings directly to issuers and distributors, while charging only a small management fee itself. The consortium consists of more than 140 companies, including Visa, Mastercard, Stripe, BlackRock, Coinbase, Google, and others. Stripe has already planned to set OUSD as the default stablecoin for enterprise transactions on its platform, and Coinbase has also confirmed that it will integrate OUSD into the Base network.

Mizuho believes this “share-the-benefits” model will create three layers of pressure:

First, distributors’ negotiating power rises. Circle’s revenue-share agreements with its largest distribution partner, Coinbase, are expected to be renewed in August 2026. Coinbase is also a founding member of the Open USD ecosystem, giving it stronger leverage in negotiations. Mizuho expects Circle’s distribution and trading costs as a proportion of revenue to rise from 64% to 73%.

Second, profit margins continue to compress. Mizuho cut its 2027 adjusted EBITDA forecast for Circle from $1.09 billion to $699 million, about 25% below the $941 million consensus on Wall Street. Even with the model assuming interest rates in 2027 are higher than previously expected, Mizuho still believes “this is not enough to offset potential price compression.”

Third, valuation discount. Mizuho applies about a 17x EBITDA multiple to Circle, which is roughly a threefold discount versus the roughly 20x average of comparable companies (Visa, Mastercard, Coinbase, Robinhood), citing slower growth in USDC market cap and intensified stablecoin competition.

USDC’s growth dilemma: shrinking supply and pressured market share

Another reason behind the downgrade is USDC’s weakening growth momentum.

As of mid-July 2026, USDC’s circulating supply is about $73 billion, down by about $7 billion from the nearly $80 billion peak in March 2026. This contraction is occurring amid a broader decline in the stablecoin market—since May 2026, the global stablecoin total market cap has shrunk by about $100 billion to roughly $3.12 trillion, and the stablecoin market fell by $77 billion in June alone, the largest monthly drop since the Terra-Luna collapse in 2022.

Although USDC’s market cap ranking remains second globally, it faces multi-layered pressure. On one hand, lower trading activity in the crypto market directly affects stablecoin demand; on the other hand, more regulated new stablecoin issuers entering the market dilute existing share. Even though Circle received the final approval from the U.S. Office of the Comptroller of the Currency (OCC) on July 10, 2026 to establish Circle National Trust, a national digital asset trust bank, Mizuho still believes this regulatory milestone “does not solve the fundamental issue hurting the stock price.”

The shared ground amid disagreement: what’s the essence of the moat battle?

However, Wall Street is not unanimously bearish.

On the day after Open USD was announced (July 1, 2026), Bernstein reiterated its “outperform the market” rating for Circle and a $190 target price, implying more than 200% upside from the then $62.63 closing price. Bernstein believes that the scale of the Open USD consortium actually validates the growth potential of stablecoins as an asset class, rather than directly threatening Circle. William Blair’s analysts also kept an “outperform the market” rating, describing OUSD as “a solution looking for a problem.”

At the heart of this disagreement is a different assessment of where Circle’s moat comes from.

The bullish case rests on three levels: first, USDC is deeply embedded in the DeFi ecosystem, the Base chain, and AI crypto payment infrastructure, making near-term migration costly; second, Circle receives monthly reserve attestations audited by Deloitte, and its compliance framework (including MiCA certification and an OCC trust bank license) creates a trust barrier in institutional partnerships; third, if the U.S. issues a formal stablecoin bill, Circle’s early regulatory advantage could translate into valuation premium.

The bearish case points to a deeper structural issue: competition in the stablecoin market may be shifting from “who is more compliant” to “who has the largest distribution channels.” Open USD’s consortium model is essentially a “distributor consortium”—it enables participants that own payment networks (Stripe, Visa), merchant ecosystems (Shopify), and institutional funding channels (BlackRock) to share reserve earnings directly, incentivizing these channels to actively promote OUSD rather than USDC.

Circle’s float-capture model rests on the premise that issuing stablecoins itself is a scarce capability of value. But Open USD’s logic is: issuance is not the source of value—distribution is. If the market validates this logic, Circle’s positioning as “digital dollar infrastructure” faces a fundamental challenge.

JPMorgan’s analysis from another angle also supports this trend. The bank noted that under the revised USDC partnership terms between Circle and the decentralized exchange Hyperliquid, Coinbase will receive all USDC reserve earnings tied to Hyperliquid, and then return about 90% of those earnings to the DEX. JPMorgan calls this setup a “prisoner’s dilemma”—Circle and Coinbase are forced to compete with each other by offering the most attractive revenue-share terms to keep partners. Hyperliquid holds about $6 billion worth of USDC, or roughly 8% of total circulating supply.

What investors should watch

Putting the above together, what Circle faces is not a single-dimension competition, but a multi-layer contest involving its profit model, the distribution landscape, and industry pricing power. The following variables are worth tracking continuously:

Changes in USDC supply. Whether $73 billion becomes a temporary bottom, or whether the downtrend continues, will directly reflect market demand and redemption pressure.

Reserve yield trends. More than 95% of Circle’s revenue comes from Treasury interest on USDC reserves. Any changes to the Fed’s interest-rate path will have a multiplier effect on Circle’s earnings.

Stablecoin market-share redistribution. The adoption pace after Open USD’s official launch—especially actual transaction volumes within the Stripe and Coinbase ecosystems—will be the litmus test for the “distribution-channel advantage” theory.

Coinbase revenue-share agreement renewal outcome. August’s negotiations will be the key indicator for Circle’s margin trajectory. If the split ratio increases significantly, it will validate Mizuho’s core concern.

Q2 earnings. Market expects earnings per share of $0.20 this quarter. Actual data on revenue growth, EBITDA margin, and USDC average circulating volume will provide a more objective reference than any analyst report.

Conclusion

Circle currently still has the world’s second-largest stablecoin, the strictest compliance framework, and the deepest DeFi integration. But the emergence of Open USD marks a new phase in the stablecoin industry—from “product competition” to “ecosystem competition.” This is not a contest about which stablecoin is safer; it’s a contest about who controls distribution channels and who decides how revenue is allocated.

For CRCL investors, the key question for the second half of 2026 may no longer be “whether USDC can keep being #2,” but rather “whether Circle’s moat can still hold up in an era where distribution is king.” The answer is not yet clear, but the battle has already fully begun.

FAQ

Q1: Why did Mizuho downgrade Circle (CRCL) to “Underperform”?

Mizuho believes Open USD’s “revenue-passing” model allocates the vast majority of reserve earnings to distributors, which may force Circle to cede more income share to partners such as Coinbase, thereby compressing profit margins. Mizuho cut its 2027 EBITDA forecast for Circle from $1.09 billion to $699 million and slashed its target price from $85 to $50.

Q2: What is Open USD? How is it different from USDC?

Open USD (OUSD) is a dollar stablecoin announced on June 30, 2026 by the Open Standard consortium made up of more than 140 companies, with supporters including Visa, Stripe, BlackRock, Coinbase, and others. Unlike the model where Circle keeps most reserve earnings, OUSD allocates the vast majority of reserve earnings to distribution partners itself only charges a small management fee.

Q3: What are USDC’s current circulating supply and market share?

As of mid-July 2026, USDC’s circulating supply is about $73 billion, down somewhat from the nearly $80 billion peak in March 2026. USDC is the world’s second-largest dollar stablecoin, behind Tether’s USDT (about $1.84 trillion).

Q4: How does Circle receiving an OCC banking license affect the stock price?

On July 10, 2026, Circle received final approval from the OCC to establish a national digital asset trust bank, and the stock jumped more than 10% pre-market. But Mizuho believes this approval did not resolve the fundamental issues such as USDC growth slowing and intensifying competition, so the stock later gave back most of its gains.

Q5: What are analysts’ consensus expectations for Circle (CRCL)?

Based on a survey of 25 analysts, the consensus rating for CRCL is “Buy,” and the average 12-month target price is $123.35. However, the target price range varies widely, with the lowest at $55 and the highest at $243, reflecting significant disagreement in the market about Circle’s outlook.