Mizuho downgrades Circle, cuts price target to $50

A major Japanese investment bank has downgraded Circle Internet Group, the issuer of the USDC stablecoin, citing a fundamental competitive threat from a new rival. Mizuho Securities cut its rating on Circle from Neutral to Underperform on July 14 and slashed its price target from $85 to $50, warning that the emerging Open USD stablecoin could pressure the core economics of Circle's business.

The downgrade centers on a key difference in how the two stablecoins handle the yield generated from their underlying reserve assets. Circle's USDC model sees the company retain a portion of the reserve income before sharing revenue with major distribution partners like Coinbase. In contrast, Open USD, which launched on June 30 and is backed by a consortium of over 140 companies including Coinbase, Mastercard, Stripe, and BlackRock, employs a "pass-through" model. This structure directs nearly all reserve earnings to its distribution partners after a small management fee.

Mizuho analysts, led by Dan Dolev, argue this creates a new pricing benchmark that could force Circle to concede a larger share of its reserve income to retain partners. The bank raised its estimate for Circle's...