A new stablecoin is vowing to dethrone the incumbents with a model based on shared governance and revenue, but will the result live up to the hype?
Stablecoins’ inroads with tradfi operators took a giant leap forward this week with the announcement of Open USD (OUSD), a “shared stablecoin for global financial activity.” The token is being launched “later this year” by Open Standard, “an independent company with a board made up of Open USD’s partners, ensuring decisions are made for the collective interest, not a single entity.”
OUSD’s three ‘key design principles’ include allowing businesses to mint and redeem the token “at no cost and with no artificial limits on volume.” Partners who “adopt and distribute” Open USD “receive all of the earnings from OUSD’s reserves, less a small management fee” needed to cover operational costs. And the collaborative governance will theoretically eliminate the downsides that stem from third-party issuers’ roadmaps not meeting the needs of businesses that use their tokens.
Open Standard believes the way to unlock stablecoins’ full potential is “costs must be predictable and value should flow back to the ecosystem.” OUSD’s infrastructure is being built “to handle billions of transactions” and “to move trillions” of dollars. Its open governance “promotes broad adoption as a shared asset in financial markets.”
Open Standard is pitching OUSD as capable of handling virtually every conceivable use of digital money, including payments, transfers, settlement, programmatic payments by artificial intelligence (AI) agents, as well as “a neutral asset as the foundation for trading activity” on all platforms, be they tradfi, centralized digital asset exchanges, or decentralized finance (DeFi) applications.
The list of the businesses that have already “signed up to use” OUSD is too long to repeat in full here, but they include major names from a variety of financial sectors, including payments (Visa [NASDAQ: V], Mastercard [NASDAQ: MA], American Express [NASDAQ: AXP], Discover, Stripe, Western Union [NASDAQ: WU], etc.), banking (BlackRock [NASDAQ: BLK], BNY, Standard Chartered [NASDAQ: SCBFF], DBS [NASDAQ: DBSDY], SoFi [NASDAQ: SOFI], National Australia Bank [NASDAQ: NAUBF], Westpac, etc.), corporations (Google [NASDAQ: GOOGL], Samsung [NASDAQ: SSNLF], IBM [NASDAQ: IBM], Shopify [NASDAQ: SHOP], Rakuten, DoorDash, etc.), and blockchain (Coinbase [NASDAQ: COIN], Crypto.com, Bybit, OKX, Ripple, Galaxy Digital, Anchorage Digital, Tempo, MoonPay, MetaMask, Bitget, BVNK, Rain, etc.)
Zach Abrams, Open Standard’s ‘founding CEO’ (and co-founder/CEO of Bridge, Stripe’s stablecoin infrastructure unit), celebrated the “over 140 businesses” that have agreed to support OUSD due to it being “open, low-cost, high-throughput, broadly accessible, and aligned to their interests.” Abrams called the token “a stablecoin built for the internet economy, designed by the businesses growing it.”
OUSD’s announcement was hailed by White House crypto adviser Patrick Witt, who tweeted the news as “another example of how clear rules of the road can unlock massive value.” Witt credited last year’s passage by Congress of the stablecoin-focused GENIUS Act as a catalyst to OUSD’s creation, adding a pitch for the Senate to get on with passing the CLARITY Act, which will bring similar benefits “for all other digital assets.”
Prognosis negative?
Investors weren’t oblivious to Open Standard’s repeated references to its new stablecoin’s focus on shared interests rather than serving “a single entity.” The June 30 announcement sent the share price of a certain entity, USDC issuer Circle (NASDAQ: CRCL), from ~$75 to $62.18 by the close of Tuesday’s trading. The initial shock may have worn off, but the shares have yet to regain their lost ground, closing Thursday at $64.62 (+4.3%).
As of Thursday afternoon, USDC’s market cap is hovering around $73.2 billion, ~$400 million below its cap before the OUSD announcement. Meanwhile, USDC’s biggest rival, the market-leading USDT issued by Tether, saw its cap fall ~$2 billion from the day before OUSD’s public debut to $184.1 billion as of Thursday.
USDT’s cap is still more than twice that of USDC, but USDT’s relative decline was significantly greater. And yet, Tether CEO Paolo Ardoino couldn’t resist taking a thinly veiled shot at USDC by tweeting “Welcome OUSD. Player 2 has entered the game,” finishing with a ‘fire’ emoji. Ardoino appears to want the market to believe that USDC’s longstanding runner-up role is under threat.
Some analysts believe the Circle selloff fears are overblown, arguing that Circle’s first-mover advantage in establishing USDC as the standard for DeFi, agentic AI and other functional channels will be hard to match, let alone surpass. William Blair analysts called OUSD “a solution searching for a problem” and poured cold water on OUSD’s ‘shared earnings’ pitch, noting that Circle already offers incentives to its USDC partners.
Bernstein analysts echoed this ‘overreaction’ narrative, noting that USDC might lag USDT in market cap but far outstrips all stablecoins in terms of legit commercial transactions (rather than P2P transfers).
While Circle is paying the immediate price of OUSD’s arrival, the long-term blow might fall on the dollar-denominated also-rans, like the PYUSD issued by PayPal (NASDAQ: PYPL), RLUSD issued by Ripple Labs (although Ripple is an OUSD partner), the Global Dollar consortium’s USDG, and perhaps even the USD1 issued by the Trump-linked World Liberty Financial, although that latter token has unique benefits the others can’t hope to match (at least, until Trump exits the White House in 2028).
RLUSD’s cap fell by 10% in the immediate aftermath of the OUSD announcement but has since regained that ground and then some. PYUSD’s cap got ahead of the news, falling ~2% the night before the announcement, but then rebounded above its previous total two days later. USDG bucked this trend by rising 1% following the announcement.
Meanwhile, a lone individual might end up reaping a sizable and unexpected reward from OUSD’s existence. Following the launch announcement, Ethereum developer Joe Shiarizzi tweeted that “more than 20 people have reached out to me this week to buy [the] opendollar.com [domain] from me. Now I know why.”
Allaire responds
The day after Open Standard’s announcement, Circle CEO Jeremy Allaire tweeted a lengthy response to the “lots of questions from our investor community” that Circle had received. Allaire said he and his team remain “huge believers in growth in the stablecoin ecosystem and welcome OUSD as a new member of the community!”
That said, Allaire referenced the “considerations around any new initiative,” laying out three possible issues that OUSD might face. First, regarding OUSD’s ‘free mint and burn’ commitment, Allaire says this “suggests that existing stablecoins charge burn fees, and payments firms should not need to pay these (despite the fact that the entire payment industry is built on small bps [basis points] fees on various ingress and egress points on their networks) … It may seem easy to say one will offer unlimited and free redeems, however market reality likely forces other behavior. This can be addressed—and is addressed by Circle—through contractual mechanisms vs. a blanket fee exemption.”
Second, Allaire says that while the “everybody wins and shares” promise also “sounds good in principle, the reality of the market and market opportunity is quite different.” Circle already shares “the majority of its income with its distribution partners,” but the income Circle retains “allows us to invest in the massive market infrastructure that makes this such a powerful and valuable utility for the world to build on.” The alternative is “a recipe for starving an infrastructure, systematically underinvesting and ensuring that your platform will remain limited in scope.”
Third, Allaire claims that OUSD’s promise of “a consortium where everybody has a voice” ignores the reality that “the track record of consortium products achieving scale, P/M [product/market] Fit or even basic product agility is absolutely dismal … Large groups of large companies coordinate poorly, have misaligned incentives, slow things down and rarely create the space for real durable innovation and competitiveness.”
USDC itself was once part of a consortium called Centre, whose members were limited to Circle and Coinbase. Centre was dissolved in 2023 in favor of a revenue-sharing and equity deal that ensured Coinbase profits as much or more off USDC than Circle.
Allaire’s post obliquely referenced this history, noting that “even with a very small group, [Centre] ran into endless challenges and complexity.” Referencing consortiums in general, Allaire argued that “everyone feels like they should put their logo on the list, kiss the ring, and make noise about openness. But typically those same firms will turn to their operating units and make the best decisions for their customers, which often means partnering with the market leader and building durable win-win partnerships.”
Finally, Allaire addressed Coinbase’s involvement in OUSD, saying Circle’s “stablecoin partnership with Coinbase remains as strong as ever, and I think we both see that enormous opportunity ahead to expand the USDC network.”
The Circle-Coinbase revenue-sharing deal is up for renewal in August, so Coinbase’s OUSD support can be read as the exchange either hedging its bets, abandoning a sinking ship, or giving itself leverage in contract renewal negotiations. (Our money’s on Door #3.)
Circle seals deals as tradfi embraces blockchain, not speculation
OUSD’s announcement spoiled what should have been a solid close to the month for Circle, including a flurry of deals that, in other circumstances, would have provided USDC (and Circle’s share price) with a significant boost.
On June 26, Circle signed a memorandum of understanding with Nomura Holdings (NASDAQ: NMR) to “pursue a strategic collaboration in digital finance across global markets, including Japan.” The deal will see Japan’s largest investment bank and brokerage “consider opportunities in areas such as instant settlement using stablecoins backed by fiat currencies and other assets, as well as ways to enhance collateral management, fund transfers, and capital markets transactions.”
On June 29, Circle and U.S. banking heavyweight BNY Mellon (NASDAQ: BK) announced they were expanding their existing partnership (BNY is the primary custodian of USDC’s fiat reserves), with USDC becoming the first stablecoin on BNY’s Digital Asset Custody platform. BNY clients can now “store, transfer, mint and burn USDC,” and while BNY plans to expand its stablecoin palette “over time,” it’s a USDC-only show for the moment.
On July 2, Circle announced that institutional clients of U.K. bankers Standard Chartered (NASDAQ: SCBFF) could now access USDC minting and redemption. Standard Chartered becomes the first ‘global systemically important bank’ (G-SIB in Financial Stability Board parlance) to offer such services via “a single onboarding and service experience,” meaning clients don’t have to hold direct accounts with Circle to access these services.
For the moment, this option is available only through Standard Chartered’s operations in the Dubai International Financial Centre (DIFC), but additional markets will be added: “subject to regulatory approvals and market readiness.” USDC and its euro-denominated EURC stablecoin earned the designation of recognized crypto tokens from the DIFC last year.
A while back, it became fashionable for corporations and governments to repeat the mantra of ”blockchain, not Bitcoin,” aka dismissing the speculative aspects of ‘crypto’ while focusing on the utilitarian possibilities of the underlying tech.
But given the BTC token’s price peak last October and its ensuing fall from grace, coupled with increased corporate adoption of stablecoin tech, that mantra no longer appears so mockable.
Would a CBDC by another name smell as foul?
Stablecoins may be getting a warmer embrace from tradfi institutions, but the tokens’ popularity with bad actors is (unfortunately) a long-established tradition. Western governments have been cracking down on stablecoins used for money laundering, sanctions evasion, ‘pig butchering’ scams, and terrorist financing, and this effort shows no signs of letting up.
On July 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) updated its list of counter-terrorism designations to include 134 digital wallets linked to ISIL Khorasan (ISIS-K), the Islamic State terror group’s Pakistani/Afghani offshoot. Three of these wallets were on the Monero chain, while the other 131 were on TRON, the network founded by Justin Sun.
According to blockchain analytics firm Chainalysis, the wallets have received over $1.4 million since 2023 and sent over $880,000. The sent tokens went to several Syria-based money services businesses, while the received tokens came from two unspecified ‘mainstream exchanges’ and one named-and-shamed one, HTX (formerly Huobi).
HTX was hit with U.K. financial sanctions in May for allegedly facilitating sanctions evasion by entities linked to Russia’s government. (HTX is rumored to be included in the European Commission’s next round of Russia-targeted sanctions coming later this month.)
The TRON wallets all contained USDT, and Tether has reportedly frozen the contents of all 131 wallets, using the centralized controls that all stablecoin issuers possess. This latest freeze/seize is tiny compared to the $344 million of Iran-linked USDT that Tether froze in April. That figure may be a serious undercount if Treasury Secretary Scott Bessent’s subsequent comments about seizing ~$1 billion worth of Iran-linked tokens included additional USDT.
In January, Tether CEO Ardoino claimed his company had frozen $3.5 billion worth of USDT, with ~$2 billion of that frozen in just the past two years. That acceleration followed Tether’s abandonment of its previous stance of declining to act against ‘secondary addresses’ linked to flagged wallets but not specifically identified in law-enforcement freezing ‘requests.’
This spring’s freezes should have brought Tether’s total close to or above $4 billion. And yet, Tether’s freezing total shows only $3.7 billion, according to the tally by the censorship foes at stables.rip. As of Thursday afternoon, USDT accounted for 10,589 of the 11,305 addresses frozen to date (of which 7,624 were on TRON).
While Circle has always held itself up as the more legally compliant stablecoin issuer, its reputation as being slow to act following crypto thefts or compromises of blockchain platforms is reflected in the freezing tally. To date, only 716 USDC wallets containing a mere $12.6 million have been frozen by Circle. Allaire & Co. might argue that this is further evidence of USDC’s propriety, but others would call that a cop-out.
It’s somewhat ironic that American conservatives have long raged at the concept of a central bank digital currency (CBDC), based on their belief that (a) central bankers have no business monitoring your online transactions, and (b) the government shouldn’t have the power to freeze your cash at will. As one stablecoin critic noted last week, “$1 in every $70 of stablecoins is frozen … CBDC is here already.”
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