Jefferies flags USDC risk as Open USD stablecoin consortium grows
Jefferies says investors may be underpricing competition risk for Circle and USDC, even after Circle (CRCL) shares rebounded following a sharp selloff. The brokerage warns that new bank- and fintech-backed stablecoins—especially the Open USD consortium—could pressure USDC supply growth and market share.
Open USD is backed by 140+ firms including Stripe, Coinbase, Visa, Mastercard and BlackRock. Its pitch is to share reserve income with participants, which could make it more attractive to payment providers and fintechs. Jefferies argues this shifts the competitive landscape away from Circle’s early advantage after USDC launched in 2018.
A key concern is Coinbase’s role. Circle reportedly earns about 95% of its revenue from interest on USDC reserves and relies heavily on Coinbase as a major distribution partner. Jefferies notes the commercial agreement is reportedly up for renewal in August. While Coinbase joining Open USD is not viewed as an exit from USDC, Jefferies warns the exchange could promote competing stablecoins over time.
Circle CEO Jeremy Allaire pushes back, saying stablecoins are network businesses built over years and that USDC’s integrations, liquidity, DeFi presence, and regulatory footprint give it durable advantages. He also disputes Open USD’s “reserve income sharing” as a unique value proposition and questions whether a large consortium can coordinate fast enough under regulatory pressure—an issue echoed by ARK Invest’s Lorenzo Valente, who cites past consortium initiatives as difficult to scale.
US traders should watch for headlines around Coinbase distribution decisions and any early traction from Open USD that could affect USDC liquidity and stablecoin flows.
Bearish
Jefferies’ core claim is that Open USD creates incremental competition just as Circle (and USDC) moves into a more crowded phase. The bearish tilt comes from (1) Open USD’s reserve-income sharing improving its value proposition for payment providers, (2) Coinbase’s participation potentially redirecting distribution incentives after its August renewal, and (3) Jefferies stressing that USDC’s headwinds may not fade.
In the short term, this can increase relative risk for USDC-related equity (CRCL) and for stablecoin flow expectations, especially if traders start anticipating tighter growth or share loss. In the long term, even if Circle’s network effects remain strong, the market may continue to price a “more competitive regime,” compressing upside expectations for USDC issuance and liquidity share.
Historically, when major distribution partners discuss competing rails (or stablecoin promotion), markets often react with a re-pricing of issuer growth narratives before any measurable migration occurs—leading to bearish sentiment and volatility around stablecoin-related headlines.