Mizuho Downgrades Circle on Open USD Margin Risks

Led by Dan Dolev, the Mizuho team warned that Open USD threatens to disrupt the standard stablecoin model by altering how reserve income flows to distributors. Unlike Circle’s current structure, where reserve revenue is generated before sharing with partners, Open USD allows participants to retain earnings directly after covering minimal management fees. This shift creates a new pricing benchmark that could pressure Circle’s ability to retain yield.

The bank’s outlook for 2027 reflects this skepticism, with adjusted EBITDA forecasts dropped to $699 million—roughly 25% below analyst consensus. Mizuho also raised its estimate for Circle’s distribution and transaction expense ratio from 64% to 73%. A critical pressure point remains the revenue-sharing agreement with Coinbase, which is slated for renegotiation in August. Given Coinbase's involvement in the Open USD ecosystem, analysts suggest the exchange may hold significant leverage in upcoming contract talks.

While Circle recently secured federal approval to establish the Circle National Trust and continues to pilot cross-border payment projects with JCB in Japan, these milestones are currently overshadowed by margin concerns. JPMorgan analysts echoed similar sentiments, noting that new revenue-sharing arrangements, such as those with Hyperliquid, could further dilute reserve income even if total USDC usage climbs. Despite USDC maintaining a circulation of approximately $73 billion, the competitive landscape is forcing a revaluation of the company’s long-term profitability.