Key Points
On June 30, a coalition of more than 140 financial, tech, and retail giants — including Visa, Mastercard, Stripe, BlackRock, Coinbase (NASDAQ: COIN), Alphabet’s Google, and Shopify — backed a new stablecoin called Open USD (OUSD).
Shares of Circle (NYSE: CRCL), the fintech company that mints the USD Coin (CRYPTO: USDC) stablecoin, immediately plummeted after the announcement. Let’s see why Circle’s stock dropped, and whether that pullback is a buying opportunity for patient investors.
Why is OUSD an existential threat to USDC?
Circle backs the USD Coin with its own cash and U.S. Treasury holdings. Most of its revenue comes from the interest earned on those assets. OUSD aims to disrupt that business model by sharing that reserve income with its ecosystem partners that distribute and use its coins. Therefore, companies now have a major reason to use OUSD instead of USDC.
Unlike USDC, which is only managed by Circle, OUSD is managed by an independent board of partners. That decentralized governance democratizes the control of the stablecoin, making it much more appealing to companies that don’t want Circle calling all the shots.
OUSD also aims to provide zero-cost minting and redemptions with no volume limits. Those perks could undermine Circle’s fee structures and reduce the operational friction that institutional investors often experience when moving their capital across Circle’s platform.
Lastly, Coinbase’s decision to sign on as a partner for OUSD is a bright red flag, since it was also a founding partner of USDC. Coinbase currently retains all interest income on USDC held on its platform and pays half of its residual reserve income to Circle. The crucial revenue-sharing partnership will expire on Aug. 18. If Coinbase refuses to renew that deal and goes all-in on OUSD instead, Circle’s stock could drop even further.
Is it the right time to buy Circle’s stock?
OUSD will launch by the end of 2026, and its pending arrival could generate unpredictable headwinds for Circle over the next few years.
From 2025 to 2028, analysts expect Circle’s revenue to nearly double and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to more than double. If those estimates are accurate, then its stock is still a bargain at three times next year’s sales and 14 times its adjusted EBITDA. But if OUSD’s arrival forces those analysts to hastily reduce their estimates, Circle could actually be overvalued relative to its growth potential.
It’s still too early to assume that OUSD will pull companies away from USDC, but that existential threat makes Circle a lot less appealing. Investors should wait to see how Circle responds — and if Coinbase renews its revenue-sharing agreement — before buying the stock.
Should you buy stock in Circle Internet Group right now?
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, BlackRock, Mastercard, Shopify, and Visa. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.
