Mizuho analysts led by Dan Dolev published a research note on Wednesday arguing that the Clarity Act could negatively impact Circle over the long term, contrary to widespread expectations that the crypto market structure bill would benefit the digital asset industry broadly. The analysts stated that regulatory certainty from the Clarity Act could attract increased institutional competition in the stablecoin space, further commoditizing Circle's USDC and eventually eroding the company's revenues. This view comes as the stablecoin market faces accelerating commoditization, with regulatory frameworks potentially lowering barriers to entry for traditional financial institutions seeking to launch competing products.
Mizuho Identifies Open USD as Revenue Threat to Circle
Mizuho analysts argued that the Clarity Act opens the door for institutional-scale competition in stablecoins, with the recently announced Open USD stablecoin posing a significant threat to Circle revenue. Open USD is backed by a consortium of more than 140 financial, technology and crypto companies, including Visa, Mastercard, Stripe, BlackRock and Coinbase.
The competitive threat stems from structural differences in revenue models. Circle retains approximately 38% of USDC's reserve income after sharing revenue with partners such as Coinbase and Binance. Open USD operates on a pass-through model that routes nearly all its reserve yield to distributors while retaining only a small management fee.
Mizuho also suggested that Coinbase, USDC's largest distributor, could gain additional leverage in its next revenue-sharing negotiation with Circle because it has endorsed Open USD. The analysts stated the companies' distribution agreement could be renegotiated as soon as next month.
Senate Republicans Release Latest Clarity Act Text
On Wednesday, the Clarity Act took one step closer to becoming law as Republicans released the latest text for the legislation, setting it up for a possible full Senate vote as soon as next week. There may be some issues around ethics that could limit the bill's chances of getting all the votes it needs to clear the Senate.
Circle Shares Trade at $67 with Mizuho Maintaining $50 Target
Shares of the USDC issuer were changing hands at about $67, down roughly 6% on the day. Mizuho analysts maintained their $50 price target for Circle.
FAQ
What is Mizuho's view on how the Clarity Act will affect Circle?
Mizuho analysts led by Dan Dolev stated in a research note on Wednesday that the Clarity Act could negatively impact Circle over the long term by opening the door for increased institutional-scale competition in stablecoins, further commoditizing USDC and eventually eroding Circle's revenues.
How does Open USD's revenue model differ from Circle's USDC?
Circle retains approximately 38% of USDC's reserve income after sharing revenue with partners such as Coinbase and Binance. Open USD operates on a pass-through model that routes nearly all its reserve yield to distributors while retaining only a small management fee.
What is Mizuho's price target for Circle?
Mizuho analysts maintained their $50 price target for Circle, while shares were trading at about $67, down roughly 6% on the day.
