Circle is facing one of its biggest challenges following the announcement of Open USD (OUSD), a new stablecoin backed by major financial and payments companies, including Visa, Mastercard, American Express, BlackRock, and Coinbase.

As speculation grew over what the new initiative could mean for USDC, Circle’s stock came under pressure. It has fallen about 12.7% over the past five trading days.

While incumbents still control the vast majority of the market, industry experts believe OUSD could significantly reshape the competitive landscape.

OUSD vs. USDC

In a conversation with CryptoPotato, Alex Witt, General Partner at Verda Ventures, said that “distribution is king” and value will accrue to built-in distribution networks. He explained,

“Circle, unlike Tether, does not own its primary distribution channels, as evidenced by Circle sharing 90% of USDC reserve yield with Hyperliquid, demonstrating its weak competitive position.”

As a result, Witt believes OUSD could “dramatically erode” the company’s first-mover advantage.

Meanwhile, Trace Finance co-founder and CEO Bernardo Brites described Open USD as “a real structural break” in the stablecoin market.

He said markets read the announcement as a direct threat to Circle, but also noted that skeptics have flagged real execution risks, including bootstrapping liquidity from zero, the lack of trading pairs against major crypto assets, governance friction from coordinating many stakeholders, and a thin fee model that could leave OUSD under-resourced.

Even so, Brites argued that Open USD’s consortium is “bigger than anything the USDG consortium assembled,” referring to the consortium behind Paxos-issued USDG.

“Getting the major card networks, processors like Adyen, and banks like BNY and Cross River behind a single stablecoin is unprecedented. Distribution has always been the hardest problem in stablecoins, and OUSD is launching with more of it than any issuer before.”

Allaire: OUSD’s Model Could ‘Starve an Infrastructure’

Circle CEO Jeremy Allaire, however, pushed back against many of the arguments made in favor of the new stablecoin. In a tweet, Allaire said that stablecoin networks are platform and network effect businesses that tend towards “winner-take-most market structures,” while suggesting that years of network building matter more than newly announced consortia.

Responding to OUSD’s revenue-sharing model, the exec said Circle already shares the majority of its income with distribution partners, and added that “giving away all the income is a recipe for starving an infrastructure.” He also remains skeptical of OUSD’s governance model and argued that the track record of consortium products achieving scale, product-market fit, or even basic product agility is “absolutely dismal.”

“We actually tried this in the early days of USDC, and even with a very small group, ran into endless challenges and complexity.”

While acknowledging the new entrant, Allaire said Circle’s partnership with Coinbase “remains as strong as ever” and went on to say that he expects many of OUSD’s founding members to remain USDC partners and customers.