Mizuho Securities has reduced its recommendation on Circle Internet Group - the issuer of the USDC stablecoin - to Underperform from Neutral and cut its target price to $50 from $85. The firm attributed the move primarily to competitive pressure from a newly introduced rival stablecoin that could erode the economics supporting Circle’s core business.
The competing token at the center of Mizuho’s concern is Open USD (OUSD), a dollar-pegged stablecoin that was unveiled on June 30 by Open Standard. Open Standard is described as an independent, consortium-governed entity supported by more than 140 firms, among them Mastercard, Stripe, Coinbase and BlackRock.
Mizuho analyst Dan Dolev highlighted the structural difference between the two stablecoins. Under Circle’s existing arrangement, USDC follows a float-capture model in which Circle collects 100% of reserve income and, after revenue-sharing arrangements with distribution partners such as Coinbase and Binance, retains a blended share of roughly 38% of that income. By contrast, Open-USD adopts what Mizuho describes as a pass-through model - keeping only a modest management fee while routing nearly all reserve income to distribution partners on the premise that issuance alone does not meaningfully generate revenue.
Dolev said Open-USD’s pass-through approach to distributors, combined with its scale and likely compliance with the GENIUS Act, could fundamentally reshape Circle’s business model, which depends on retaining a substantial portion of treasury yield to drive revenue.
Another near-term variable flagged by Mizuho is Circle’s revenue-sharing contract with Coinbase, its largest distributor, which is expected to come up for renewal in August. The analyst noted that Coinbase’s potential endorsement of Open-USD could strengthen Coinbase’s negotiating position in that renegotiation.
Reflecting the greater competitive and pricing risk, Mizuho raised its projection for Circle’s distribution and transaction costs in fiscal 2027 to 73% of revenue from a prior 64% assumption. This change reduces Mizuho’s 2027 adjusted EBITDA estimate for Circle to $699 million, down from a previous $1.093 billion. Mizuho also said its revised EBITDA forecast sits roughly 25% below the Street consensus of $941 million for 2027.
While Mizuho now assumes higher interest rates in 2027 than in its earlier model, the firm said that incremental rate assumptions are insufficient to offset potential pricing compression and the resulting pressure on medium-term profitability.
On valuation, Mizuho modeled average USDC in circulation reaching about $126 billion in 2027, implying reserve income of roughly $5.058 billion. For a peer group that includes Visa, Mastercard, Coinbase and Robinhood - which Mizuho said trades at an average near 20x EBITDA - the analyst applied a multiple of about 17x to Circle, a three-turn discount to peers. The discount reflected USDC’s slowing market-cap growth and intensifying stablecoin competition.
Clear summary
Mizuho downgraded Circle to Underperform and cut its price target to $50, citing the launch of Open USD as a potential disruptor to Circle’s float-capture revenue model. The bank increased its cost assumptions for distribution and transaction expenses, lowered its 2027 adjusted EBITDA estimate to $699 million, and applied a discounted EBITDA multiple reflecting heightened competition and slower market-cap growth.
Key points
- Mizuho lowered Circle’s rating to Underperform and trimmed the price target to $50 from $85, citing competition from Open USD.
- Open USD, launched June 30 by Open Standard and backed by 140-plus firms including Mastercard, Stripe, Coinbase and BlackRock, uses a pass-through distribution model that routes nearly all reserve income to distributors.
- Mizuho cut Circle’s 2027 adjusted EBITDA estimate to $699 million from $1.093 billion and applied a roughly 17x EBITDA multiple versus a peer average near 20x.
Risks and uncertainties
- Distribution partnership outcomes - The renewal of Circle’s revenue-sharing agreement with Coinbase in August introduces negotiation risk that could materially affect Circle’s revenue split with its largest distributor.
- Market and pricing dynamics - The pass-through model adopted by Open-USD may compress pricing and margins in the stablecoin distribution channel, weighing on medium-term profitability for issuers reliant on reserve income retention.
- Regulatory alignment uncertainty - Mizuho noted Open-USD’s likely compliance with the GENIUS Act as a competitive factor; regulatory developments and their interpretation could drive differential advantages across issuers.
Tags: Stablecoin, Crypto, Payments, Fintech