CLARITY Act Could Weigh on Circle’s Long Term Growth, Says Mizuho
The proposed CLARITY Act could reshape the U.S. cryptocurrency industry, but investment firm Mizuho believes Circle may face significant long term challenges if the legislation becomes law.
According to Mizuho analysts, the bill would create greater regulatory clarity for digital assets. However, it could also increase competition in the stablecoin market, putting pressure on Circle’s USDC business and future revenue.
Regulatory Clarity May Increase Stablecoin Competition
Mizuho analysts, led by Dan Dolev, said the CLARITY Act could encourage more financial institutions to enter the stablecoin sector. Clear regulations would lower uncertainty and make it easier for established companies to launch competing digital dollar products.
The analysts believe this increased competition could reduce the market advantage currently held by USDC, making stablecoins more standardized and limiting Circle’s long term pricing power.
Open USD Emerges as a Major Competitor
One of the biggest threats identified by Mizuho is Open USD, a newly launched dollar backed stablecoin supported by a consortium of more than 140 financial, technology, and cryptocurrency companies.
The project has attracted backing from major industry names, including Visa, Mastercard, Stripe, BlackRock, and Coinbase. Analysts believe this broad institutional support could make Open USD a strong competitor to Circle’s USDC.
Different Revenue Model Could Pressure Circle
Unlike Circle’s business model, Open USD is designed to distribute nearly all reserve income to its partners while retaining only a small management fee.
Circle currently keeps about 38 percent of USDC reserve revenue after sharing earnings with distribution partners such as Coinbase and Binance. Mizuho believes Open USD’s revenue sharing structure could become more attractive for distributors, increasing competitive pressure on Circle.
Coinbase Could Gain More Negotiating Power
Mizuho also suggested that Coinbase, the largest distributor of USDC, may have greater leverage in future negotiations with Circle.
Since Coinbase supports Open USD, analysts believe the exchange could use its position to negotiate more favorable revenue sharing terms when its distribution agreement with Circle is reviewed. The next round of negotiations could reportedly begin as early as next month.
CLARITY Act Moves Closer to Senate Vote
The CLARITY Act advanced another step on Wednesday after Senate Republicans released the latest version of the legislation. The updated bill could receive a full Senate vote in the coming weeks.
Despite this progress, lawmakers continue to debate several ethics related provisions, which may affect the bill’s chances of securing enough bipartisan support for final approval.
Mizuho Maintains Conservative Outlook
Despite the growing attention surrounding Circle, Mizuho maintained its $50 price target for the company. Circle shares were trading near $67, representing a decline of around 6 percent during the day.
While the CLARITY Act is expected to benefit the broader cryptocurrency industry, Mizuho believes that stronger competition in the stablecoin market could reduce Circle’s long term growth potential and reshape the future of the USDC ecosystem.
