Author: @HadickM, Dragonfly Partner

Compiled by: Wu Says Blockchain

TL;DR:

• The impact of OUSD on Circle is not merely negative. The market's reaction to CRCL's stock price falling 15% to 20% is somewhat reasonable, but it does not mean Circle faces a "death sentence." Circle still has deep liquidity, existing integrations, and a first-mover advantage. Especially if the partnership with Coinbase is restructured or terminated, short-term net revenue may actually double, gaining more competitive space.
• OUSD may become the default stablecoin choice within the Stripe ecosystem. Stripe has obvious advantages in engineering, product, and payment tool development. If OUSD can establish sufficient liquidity, it may replace USDC as the preferred option for many Stripe partners and customers. However, for products built on the Circle API, migration still requires sufficient incentives and will not be solely determined by revenue sharing.
• The core barrier to enterprises adopting stablecoins remains unresolved. If OUSD is issued by Bridge-related entities, it essentially remains a credit exposure to the issuer, and neither Circle nor Bridge is currently an investment-grade credit subject. Unless Stripe or other alliance members provide parent company guarantees, large banks and asset management institutions may still compete for the largest and most profitable enterprise scenarios.
• Circle needs to accelerate the development of payment and fintech products and consider more proactive defensive mergers and acquisitions. OUSD will not be the last new competitor; Circle needs to respond more actively in product, distribution, and ecosystem collaboration.
• For Tether, OUSD does not directly impact its core market. Tether will continue to focus on distribution channels that Stripe and Circle do not prioritize. Although its market share may decline over time, the overall stablecoin market size is expected to grow.
• Compared to Circle and Tether, Paxos may face even greater pressure. OUSD will undermine the main selling point of USDG, and as regulatory frameworks improve, Paxos' regulatory advantage may also weaken. Thus, the challenges OUSD poses to Paxos are closer to survival.

I believe that the correct interpretation of OUSD is quite subtle. It not only concerns what OUSD means for stablecoin issuers such as Circle, Tether, and Paxos, but also relates to the broader adoption prospects for stablecoins and the likelihood of this new project’s eventual success.

First, regarding CRCL. I am not sure if it is purely coincidental: when the OUSD announcement was released, Circle CEO Jeremy Allaire happened to be speaking at Goldman’s largest and most high-profile digital asset conference. Jeremy, Goldman, and many in the audience clearly knew this announcement would be published before U.S. markets opened and knew it would negatively impact the stock price. This in itself may not indicate much, but it is indeed interesting because during his interview, people were already discussing this matter, and CRCL fell about 6% during his speech.

From a business impact perspective, the market has long been aware that stablecoin issuers will continue to increase the revenue share for distribution partners, and redemption fees must gradually be eliminated in payment scenarios. Circle has already responded to these trends: on one hand, collaborating with payment companies on minting and redemption agreements, and on the other hand, making revenue-sharing arrangements with distribution partners.

The potential restructuring or termination of the Coinbase partnership has actually been hinted at for some time. If this happens, Circle's net revenue would immediately approach double, which would be very positive for the company. Of course, within a reasonable timeframe, this portion of revenue will likely gradually flow to new distribution partners in the competition. But Circle would also be freed from the constraints of the Coinbase agreement, allowing it to participate in competition more aggressively than previously feasible. Therefore, even if the proportion of net revenue Circle can retain continues to be under pressure, the restructuring or cancellation of the Coinbase agreement itself may not be a bad thing, but rather a net positive.

Furthermore, Circle's existing deep liquidity is hard to replicate and challenging to rapidly integrate into other systems. This should not be easily overlooked or simply deemed insignificant.

However, clearly for many Stripe partners, customers, and ecosystem participants, as long as OUSD can establish sufficient liquidity, it is likely to replace the previously favored USDC and become the default stablecoin used. Undeniably, Stripe is a stronger engineering and product organization and is more likely to launch the supporting products and tools needed for stablecoin usability and distribution.

On the other hand, Circle still possesses clear first-mover advantages and existing integrations, which should not be overlooked as well. The switching costs may not be high, but if a product has been built on the Circle API, sufficient incentives are needed to trigger migration. This is harder than many imagine and does not simply rely on revenue sharing.

Of course, the real larger opportunities still come from greenfield markets that are not yet fully served. For these new scenarios, the appeal of OUSD may be stronger. But for non-payment scenarios or those payment companies that are in competitive relationships with Stripe and have different incentive mechanisms, it is currently unclear whether OUSD will necessarily outperform existing stablecoins or the other new options that may emerge in the future.

Finally, if OUSD is ultimately issued by Bridge-related entities, it does not solve a core issue that USDC faces when deeply entering the enterprise market: these tokens essentially remain credit exposures to the issuer, and neither Circle nor Bridge is currently an investment-grade credit subject. Bridge is also not yet ready to meet GENIUS Act compliance requirements, although it is advancing related work.

If Stripe's parent company or other alliance members provide parent company guarantees, the situation would be different. But whether Circle or Bridge, both still face the risk of large banks and asset management companies entering the market and capturing the largest and most profitable use cases. Meanwhile, there is still much work to be done in global licensing arrangements. Therefore, I do not believe the announcement of OUSD changes this existing competitive risk.

Overall, on the day before the OUSD announcement was released, I told others that I expected CRCL to drop 15% to 20% that day, and the final drop indeed fell within that range. I believe the market response is reasonable, but I do not think it is a "death sentence" for Circle as many commentators claim.

Circle does need to accelerate the development of payment and fintech products while also considering more actively defensive mergers and acquisitions. With stock prices falling, this window may have partially passed, but there are still some interesting options in the market for it to explore, and some of these deals may still bring enhancing effects. New competitors will not stop at OUSD; therefore, Circle needs to make some defensive arrangements.

For Tether, OUSD was never originally targeting its core market. Tether will continue to focus on distribution channels that neither Stripe nor Circle prioritizes, so it should not be significantly affected. However, as Paolo Ardoino said a few years ago on the Token 2049 stage, Tether's market share may continue to decline over time, but this will happen in a market that is significantly expanding overall.

In contrast, Paxos faces greater pressure. OUSD will undermine USDG's current main selling point, and as regulatory frameworks gradually improve, Paxos may also lose its relative regulatory advantage in the future. Compared to Circle and Tether, I believe OUSD's impact on Paxos is closer to a survival challenge. However, this also explains why Paxos has shifted its focus back to brokerage-as-a-service business in the past year.

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