Circle's Reserve Income Under Threat from Open USD Consortium
Circle's business model is facing a significant challenge from a new consortium called Open USD (OUSD), which aims to redistribute the $667.7 million in reserve income earned by Circle this quarter. The OUSD consortium, announced on June 30, has over 140 partners, including major companies like Visa, Mastercard, and Coinbase.
The consortium's model inverts the traditional issuer-keeps-the-float economics, where a single issuer captures the yield on billions in reserves. Instead, OUSD distributes that yield to the partners who drive adoption, creating a new incentive structure for the industry.
Circle has real defenses, including its large circulation of USDC ($73 billion) and charters from regulatory bodies like the OCC and NYDFS. However, the question remains whether Circle can continue to capture the income generated by that supply once a protocol exists to redirect it to the partners who move it.