Author: Tanay Ved

Translation: Deep Tide TechFlow

Deep Tide Guide: 140 institutions joined forces to launch OpenUSD, distributing reserve interest to partner networks rather than keeping it for themselves as issuers, leading to a 17% drop in Circle's stock price in one day. However, on-chain data shows that USDC is already deeply tied to core scenarios such as Coinbase and Hyperliquid, settling 79% of the $38 trillion transaction volume in 2026. The essence of this war is not to snatch existing supply but to redistribute the "easy" reserve income — whoever controls the distribution channel will control the future.

Key Points

OpenUSD challenges the traditional issuance model, distributing reserve income to over 140 partner networks, compressing Circle's profit margins rather than directly taking away the circulation of USDC.

USDC is a high-turnover stablecoin, settling 79% of approximately $38 trillion in on-chain transactions in 2026, anchoring liquidity in major exchanges, DeFi lending markets, and perpetual contract platforms.

Circle’s distribution partnerships (such as Coinbase and Hyperliquid) and regulatory positioning strengthen USDC's network effects, making it the preferred dollar channel for numerous scenarios and use cases.

Introduction

On June 30, the Open Standard Alliance, comprising 140 payment companies and banks including Stripe, BlackRock, and Coinbase, announced the launch of OpenUSD (OUSD), a stablecoin supported 1:1 by dollar reserves. Notably, OpenUSD allocates nearly all reserve interest to a network of over 140 corporate partners rather than being owned solely by a single issuer like Tether or Circle.

The news triggered a nosedive in Circle's stock price, with CRCL dropping 17% on June 30. This is not merely the release of a new stablecoin; OUSD represents a direct challenge to the traditional issuance model — in which reserve income primarily belongs to the stablecoin issuers. Does OUSD pose a real threat to Circle's profit margins and the deep-rooted network effects behind USDC's dominance?

In this edition of State of the Network, we explore whether the launch of OpenUSD poses a structural threat to Circle's business model and USDC network effects or if on-chain data tells a different story from the stock market's reaction.

Stablecoin Issuance Models: Who Captures Floating Reserves?

Below, we outline the economic models behind major stablecoins. One key differentiator is who captures the floating reserve income generated from their reserves.

For issuers like Tether and Circle, reserve income largely belongs to the issuer, driving the bulk of their revenue. For Sky and Ethena, more value is passed on to users. OUSD introduces a third model, pushing reserve income to the distribution network itself — companies that control the distribution to end users, such as fintech apps, exchanges, wallets, merchants, and payment processors.

This distinction becomes crucial as distribution is becoming one of the key differentiators for stablecoins. Circle's model is an example where the issuer shares economic benefits with key partners (most notably Coinbase), while OUSD builds this directly into its model.

As we noted in our previous scenario analyses, Circle's revenue is primarily driven by interest income on USDC balances. In fiscal year 2025, 96% of Circle's $2.7 billion revenue came from reserve income. A significant portion of this is shared with partners like Coinbase in the form of distribution costs. Therefore, Circle's revenue after deducting distribution costs (RDLC) is about $1.08 billion, a useful metric for measuring how much they retain after paying distribution fees.

The relationship with Coinbase clearly shows how stablecoin value is increasingly being attributed to platforms that hold floating reserves rather than the issuers themselves. This raises a question: Is the economic power dynamic shifting from issuers to the distribution network?

The Network Effects of USDC and Distribution

Despite dozens of stablecoins entering the market in recent years, it remains a double oligopoly, with USDT and USDC accounting for about 86% of the market share. Circle's USDC accounts for about 23% of that, valued at $73 billion. This scale is not achieved overnight; it is a byproduct of deep liquidity, regulatory advantages, and extensive cross-chain and trading venue coverage.

The following chart captures the scale of different stablecoins from two dimensions: (adjusted) on-chain transaction volume and exchange trading volume as of June 2026. USDT and USDC stand out with high settlement usage and deep trading activities, while USDS, USDe, and PYUSD occupy more niche positions in the grid. Global Dollar (USDG), another coalition-based stablecoin, has so far failed to gain similar traction.

USDC also settles the majority of on-chain transaction volume. In the first half of 2026, USDC settled about 79% of approximately $38 trillion in adjusted on-chain transaction volume, with Base accounting for 69%. USDT accounted for $7 trillion (about 18%), indicating that while USDC has a lower circulation, its turnover rate is higher than that of USDT.

Where is USDC Supply?

Next, let’s look at where this USDC is actually stored. In centralized exchanges, USDC serves as the main quoted and settlement asset, while in DeFi, it is stored in money markets, treasuries, DEX liquidity pools, and as collateral for other stablecoins. Exchanges like Coinbase and Binance hold billions of USDC, with Hyperliquid, Sky PSM, and Aave v3 occupying substantial on-chain balances.

From the perspective of Circle's relationship with Coinbase, the shift in issuer economics becomes clearer. As Coinbase reported in its Q1 2026 earnings, about 25% of USDC circulation is held within Coinbase's products. This coverage enables Coinbase to capture about half of the USDC economy, facilitating deeper integration and adoption rather than ceding the majority of the value to Circle.

Hyperliquid is one of the clearest recent examples. In May 2026, Coinbase became the official USDC treasury deployer on Hyperliquid, with Circle as the technology deployer, reinforcing USDC's status as the platform's native stablecoin. Under AQAv2, Hyperliquid can capture up to 90% of the reserve income generated from USDC balances on its platform, transferring an estimated $135-160 million in annual income from Circle and Coinbase to HYPE token buybacks and the protocol ecosystem.

This illustrates how USDC is embedded at the center of rapidly growing market activities, including on-chain perpetual contract DEXs like Hyperliquid and Lighter, where default quoted assets can shape liquidity, collateral preferences, and further integrations. It also highlights how the dynamics of issuers and distributors' economies have already become intertwined: platforms like Coinbase and Hyperliquid are no longer just places that hold USDC but are key economic participants in USDC's floating reserves.

Onshore Dominance and Regulatory Advantages

The dominance of stablecoins is also a result of the depth and breadth of liquidity. The following chart compares the breadth of quoted assets for USDT, USDC, and other stablecoins on spot exchanges. At offshore venues like Binance, Bybit, and OKX, USDT still anchors the vast majority of markets priced in stablecoins.

Onshore and regulated exchanges like Coinbase, Gemini, Kraken, Bitstamp, and Crypto.com heavily rely on USD and USDC trading pairs, with Coinbase unifying the USD/USDC order book. USDC is also the dominant quoted asset in on-chain venues such as Hyperliquid and Uniswap v3, directly integrating it into perpetual contracts and DeFi liquidity.

Meanwhile, Circle has now received OCC approval to establish Circle National Trust, a national trust bank that can hold and manage USDC reserves under federal regulation. This further solidifies Circle's regulatory advantages as a dollar channel that exchanges, protocols, and payment providers are willing to build around.

The competitive landscape of stablecoins is evolving around who earns reserve income, the depth of different stablecoins embedded in market infrastructure, and the regulatory frameworks surrounding them. OpenUSD is best understood as a coalition-governed shared revenue network rather than a direct attack on the existing supply of USDC, which puts pressure on the economics supporting that supply.

The core idea is that reserve income will shift from issuers to payment networks, wallets, exchanges, and other distribution channels that drive adoption. Whether this shift is strong enough to overcome USDC's deep liquidity, broad coverage, and regulatory advantages remains to be seen.