Circle’s long-term revenue outlook could come under pressure if the Clarity Act becomes law, as new federal rules may open the door to stronger stablecoin competition and weaken the economics behind USDC, according to analysts at Mizuho.
The analysts said the proposed digital asset framework moving through the U.S. Senate could encourage new entrants in the stablecoin market, putting Circle’s share of the USDC business at risk. The pressure, they said, may be especially sharp if rival stablecoins use revenue-sharing models that give distribution partners a larger slice of reserve income than Circle currently offers.
The warning comes as Circle, one of the best-known names in the stablecoin market, faces a changing regulatory and competitive landscape. Its USDC token is backed by cash and short-term assets, and the company earns revenue from yield generated on those reserves. That model has been highly profitable during a period of elevated interest rates, but it may become harder to defend if competitors pass more of that yield to payment firms, financial platforms and other distributors.
Mizuho maintained a $50 price target on Circle’s stock. The shares traded around $67 on Wednesday after falling roughly 6% during the session. The stock has also declined more than 75% from its highest open-market level, a sharp reversal that reflects growing concern over the company’s ability to protect its margins in a more crowded stablecoin market.
Clarity Act could reshape the stablecoin market
The Clarity Act advanced toward a full Senate vote this week and is designed to create a clearer legal framework for digital assets in the United States. The bill includes provisions for stablecoin oversight, as well as protections for software developers that could expire in 2029.
For companies such as Circle, the legislation could bring both benefits and risks. Clearer rules may help bring stablecoins further into the regulated financial system, giving banks, payment companies and asset managers more confidence to enter the sector. At the same time, that clarity could reduce the first-mover advantage held by existing stablecoin issuers.
Mizuho’s analysts said the bill may create an environment that supports fresh competition. In their view, the issue is not simply regulation itself, but what regulation makes possible. If large companies that were previously hesitant to launch or support stablecoins decide that the legal framework is now clearer, established players may have to share more economics with partners to keep their position.
That would matter directly for Circle because USDC’s business depends heavily on reserve yield and distribution agreements. When traders hold USDC, Circle earns income from the assets backing the token. A portion of that income is then shared with partners that help distribute or support USDC across platforms.
Mizuho estimated that Circle currently keeps about 38% of the reserve yield generated by USDC after paying distribution partners. That percentage is central to the debate over the company’s future earnings power. If competitors offer partners a much higher share of reserve yield, Circle may have to reduce its own take rate to avoid losing distribution.
Open USD adds pressure with pass-through model
The competitive threat highlighted by Mizuho is Open USD, a newer stablecoin project backed by a broad consortium of more than 140 firms across finance, technology and digital assets. The group includes major names such as Visa, Mastercard, Stripe, BlackRock and Coinbase.
Open USD uses a different revenue structure from Circle’s current model. Instead of keeping a large portion of reserve yield, it passes nearly all reserve returns to distributors and retains only a small management fee. That structure may appeal to companies that bring users, payment volume or platform access to a stablecoin network.
For distributors, the difference can be significant. A stablecoin issuer that shares most reserve income may provide a stronger financial incentive than one that keeps a larger portion for itself. That could make Open USD attractive to payment companies, financial technology platforms and other institutions looking to earn more from stablecoin-related activity.
Mizuho said the launch of Open USD was a key reason it had previously downgraded Circle. The analysts described the rival token as a major competitive force because its economics directly challenge the revenue-sharing model behind USDC.
The issue is not whether Circle remains a major stablecoin brand. USDC continues to be widely used and has strong recognition among traders, developers and institutions. The bigger question is whether Circle can maintain its current margin structure when rivals are willing to give more revenue to the companies that help stablecoins reach end users.
Coinbase agreement is a key focus
One of the most important near-term issues is Circle’s distribution agreement with Coinbase, one of its largest partners. That agreement determines how reserve revenue is divided between the two companies.
According to Mizuho, Coinbase’s support for Open USD could give it additional leverage when it renegotiates its distribution agreement with Circle next month. The talks are important because any change in the revenue split could have a direct effect on Circle’s future earnings.
If Coinbase pushes for a larger share of USDC reserve income, Circle may face a difficult choice. It could agree to give up more revenue in order to maintain a key distribution channel, or it could risk weakening one of the relationships that has helped USDC grow.
The timing matters because the August contract renewal comes as Washington is moving closer to setting federal rules for the digital asset sector. If the Clarity Act continues to gain momentum, distribution partners may view the stablecoin market as more open and more competitive than it was in past negotiations.
That could shift bargaining power away from issuers and toward platforms with large customer bases, payment networks and institutional relationships. In stablecoins, distribution is critical. A token that is easy to access, use and integrate has a better chance of building volume and liquidity.
Earnings expectations come down
Mizuho also lowered its 2027 earnings forecast for Circle to $699 million, down from a prior estimate of $907 million. The cut reflects concern that Circle may not be able to keep as much reserve yield as previously expected.
That change is important because Circle’s valuation depends heavily on expectations for future growth and profitability. Stablecoin issuers have benefited from high interest rates because the reserves backing their tokens often sit in cash-like instruments that generate yield. But if more of that yield must be shared with partners, growth in stablecoin supply may not translate into the same level of profit.
The company’s shares have already reflected some of that concern. After trading near $67 on Wednesday, Circle remained above Mizuho’s $50 target but far below the reported average target of around $123. That gap shows the wide range of views on the company’s future.
Some market participants may focus on Circle’s brand, regulatory positioning and role in the stablecoin ecosystem. Others are focused more heavily on margin pressure, competition and the possibility that reserve-yield economics will become less favorable over time.
The wider debate reflects a central question for the stablecoin industry: who should benefit most from the yield generated by reserves? Issuers argue that they provide compliance, technology, liquidity management and trust. Distributors argue that they provide the users, platforms and transaction flow that give a token scale.
Open USD’s model pushes that debate further by offering a structure that appears designed to favor distributors. If that approach gains traction, older stablecoin companies may need to adapt.
Regulation may help new entrants
Stablecoins are digital tokens usually designed to maintain a one-to-one value with a traditional currency, most often the U.S. dollar. They are used for trading, payments, settlement and moving funds between digital platforms. Their role has expanded as more companies look for faster and cheaper ways to move money globally.
In the United States, the lack of comprehensive federal legislation has long been seen as a barrier to wider adoption. Companies have had to navigate a patchwork of state rules, federal enforcement actions and uncertain agency oversight. Supporters of new legislation argue that clearer rules would help responsible companies operate with more confidence.
But clearer rules can also reduce barriers to entry. If Congress sets a defined path for stablecoin issuance and oversight, large financial and technology firms may have more reason to participate. That could increase pressure on existing issuers such as Circle.
Mizuho’s view is that the Clarity Act may create exactly that kind of opening. By giving the market a clearer legal structure, the bill could make it easier for new stablecoin projects to gain support from major firms. A competitive market may then force established issuers to share more economics or risk losing market share.
The software developer protections in the bill are also important for the broader digital asset sector. These protections are intended to reduce legal uncertainty for developers who build tools and infrastructure. However, the protections could expire in 2029, which may leave open questions about the longer-term legal environment.
Ethics provisions remain a possible hurdle
The bill is not yet final. Ethics provisions in the text released by Republican lawmakers could still affect its path through Congress. Debate over those standards may influence the timing of a full Senate vote.
Ethics rules have become a more visible part of digital asset legislation as lawmakers examine potential conflicts of interest, political connections and the role of private token projects. If the ethics provisions become a major point of disagreement, the bill’s progress could slow.
For Circle and its rivals, the timing of the vote matters. A faster path to passage could speed up the entry of new competitors. A delay could give existing companies more time to negotiate deals and adjust their business models before the rules are finalized.
Still, the direction of travel appears clear: Washington is moving closer to a federal framework for digital assets. Whether the final bill looks exactly like the current version or changes during debate, the stablecoin market is preparing for a new phase.
Margin pressure becomes the central question
The key issue for Circle is not whether stablecoins will remain important. Demand for digital dollars continues to grow across trading, payments and settlement. The bigger issue is how much profit stablecoin issuers can keep as the market becomes more regulated and more competitive.
If reserve yields remain high, stablecoin economics can still be attractive. But if partners demand a larger share, the issuer’s profit may shrink even as token usage grows. If interest rates fall at the same time, the pressure could become stronger.
Circle’s current model gives it meaningful exposure to reserve income. That has supported strong earnings expectations in the past. But Mizuho’s reduced forecast suggests that analysts are now placing more weight on the risk of lower take rates.
The emergence of Open USD adds a direct comparison. A pass-through structure that gives nearly all reserve returns to distributors could become a benchmark in future partnership talks. Even if Open USD does not immediately overtake USDC, it may still influence the terms Circle must offer to keep major partners.
For traders, the next few weeks may bring more clarity. The Senate’s handling of the Clarity Act, the debate over ethics provisions and Circle’s upcoming distribution negotiations could all shape expectations for the company’s revenue outlook.
Circle remains a major player in the stablecoin industry, but the market around it is changing quickly. Regulation may bring legitimacy and scale, yet it may also invite larger rivals and tougher economics. For a company built around the yield on digital dollars, that combination could define its next chapter.
For deeper context on US crypto rules shaping stablecoins like USDC and Open USD, explore future US crypto regulation insights today.
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