Circle faces longer-term revenue risk as Clarity Act could widen stablecoin competition

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Circle faces Clarity Act risk

Highlights

Mizuho analysts warn the Clarity Act could accelerate stablecoin competition, eroding Circle's revenue base as institutional issuers enter the market.
Open USD's launch, with backing from over 140 firms including Visa, BlackRock, and Coinbase, pressures Circle by returning most reserve yield to distributors instead of retaining 38% like Circle.
Clarity Act advanced in the Senate and Coinbase's support for Open USD may strengthen its hand in upcoming USDC revenue-sharing renegotiations with Circle, while Circle shares fell 6% to $67.

Regulatory shift and competitive pressure

The Block reports that Mizuho analysts, led by Dan Dolev, say the Clarity Act could become a long-term negative for Circle even if the legislation is broadly seen as supportive for the digital asset industry.

The analysts argue that greater regulatory clarity would open the door to more institutional-scale stablecoin issuers, increasing competition and accelerating the commoditization of tokens such as USDC. In their view, that trend could erode Circle's revenue base over time.

Mizuho recently downgraded Circle after the launch of Open USD, a dollar-backed stablecoin supported by a consortium of more than 140 financial, technology and crypto companies, including Visa, Mastercard, Stripe, BlackRock and Coinbase. The analysts say that project poses a significant threat because its model sends nearly all reserve yield to distributors while keeping only a small management fee, unlike Circle, which retains about 38% of USDC reserve income after sharing revenue with partners including Coinbase and Binance.

Implications for Circle and the crypto market

Republicans released the latest text of the Clarity Act on Wednesday, moving the bill one step closer to becoming law and setting up a possible full Senate vote as soon as next week. The measure still faces possible complications around ethics issues, which may affect whether it secures enough support to pass the Senate.

Mizuho also says Coinbase, the largest distributor of USDC, could gain added leverage in its next revenue-sharing negotiation with Circle because it has endorsed Open USD. The analysts say the distribution agreement between the two companies could be renegotiated as soon as next month.

Mizuho maintains its $50 price target on Circle. Shares of the USDC issuer are changing hands at about $67, down roughly 6% on the day, according to The Block's equities price data.

We previously reported on Circle’s (CRCL) selloff after it received OCC approval to form a national trust bank, even as investors weighed what that regulatory step means for its longer-term outlook. In that piece, we noted that analysts continued to flag intensifying stablecoin competition—alongside bearish technical signals—as a key risk to Circle’s margins and near-term price performance.

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