In a surprising turn of events, Coinbase's decision to back the rival stablecoin Open USD (OUSD) has put significant pressure on Circle, the issuer of USDC. This dual role creates a complex dynamic that could reshape the space of stablecoin distribution and revenue sharing.

Impact of Coinbase's Support for OUSD

Coinbase, the largest distributor of USDC, is also a member of the consortium behind OUSD, which includes major players like BlackRock and Visa. This coalition launched OUSD on June 30, 2026, with a structure that allows distribution partners to capture nearly all reserve income, unlike Circle's model where it retains a significant portion of earnings from the yield on U.S. Treasury securities. This shift in strategy not only enhances OUSD's attractiveness but also strengthens Coinbase's bargaining position in upcoming contract negotiations with Circle.

Mizuho's Downgrade and Financial Forecasts

On July 14, 2026, Mizuho Securities downgraded Circle from Neutral to Underperform, slashing its price target from $85 to $50. The investment bank cited concerns over Circle's declining USDC supply, which has dropped by $7 billion since March the most significant decline since 2022. Mizuho also raised its projected expense ratio for Circle to 73%, indicating a tighter profit margin that could severely impact its earnings. The forecast for adjusted EBITDA was lowered to $699 million, significantly below Wall Street's consensus of $941 million, reflecting increased operational pressures.

Strategic Consequences for Circle

As the August renewal of the revenue-sharing agreement approaches, Circle may find itself in a position where it has to concede a larger share of its income to retain Coinbase as a distributor. This scenario could further squeeze Circle's profit margins, forcing it to reevaluate its business model to stay competitive in a rapidly evolving market. The stakes are high as the relationship between Coinbase and Circle becomes increasingly strained, potentially affecting the stability and future of USDC in the broader cryptocurrency ecosystem.

This article is for informational purposes only and should not be considered financial advice.