Mizuho has downgraded Circle Internet Group to Underperform from Neutral and cut its price target to $50 from $85, citing rising competitive pressure from OpenUSD and growing risk to the stablecoin issuer’s revenue model.
The Japanese investment bank said OpenUSD’s pass-through structure could challenge Circle’s core economics by forcing more reserve income to be shared with distribution partners. Circle’s business depends heavily on income earned from reserves backing USDC, its dollar-pegged stablecoin. If competitors offer partners a larger share of yield, Circle may need to spend more to defend distribution, lowering margins even if USDC supply continues to grow.
Circle shares fell after the downgrade, with Barron’s reporting the stock was down 4.1% to $60.47 after declining 4.8% in the previous session. The move came shortly after Circle received federal approval to establish a national crypto bank, a development that had initially lifted investor sentiment. Mizuho’s downgrade reversed some of that optimism by shifting attention back to competition, valuation and long-term profitability.
The downgrade is significant because Circle has been one of the most closely watched crypto equities since its public-market debut. The company sits at the center of the regulated stablecoin market, and USDC remains the second-largest dollar-backed stablecoin after Tether’s USDT. But its public valuation depends not only on stablecoin adoption, but also on how much of the interest income from reserves Circle can keep.
OpenUSD Threatens Yield Economics
Mizuho’s concern centers on OpenUSD, a new dollar-pegged stablecoin backed by major financial and payments players. Market reports say OpenUSD has more than 140 partners and uses a pass-through model that redistributes reserve yield to participants in the ecosystem. That structure could make it more attractive to wallets, payment companies, exchanges and fintech platforms that want direct economics from stablecoin distribution.
Circle’s model is different. It earns a substantial portion of revenue from interest on reserves, then shares part of that income with partners, including Coinbase under an existing revenue-sharing arrangement. Mizuho warned that competitive pressure could force Circle to increase payouts to distributors, reducing operating leverage and weakening future earnings.
The bank also cut its 2027 adjusted EBITDA estimate for Circle to $699 million, about 25% below Wall Street consensus, according to CoinDesk. That reduction reflects concern that analysts may be overestimating Circle’s ability to grow profitably in a more crowded stablecoin market.
The issue is not whether stablecoins will grow. Most analysts expect regulated digital dollars to expand as payments, trading, tokenized assets and cross-border settlement move onchain. The issue is who captures the economics. If reserve yield is increasingly passed to platforms and users, stablecoin issuers may look more like low-margin infrastructure providers than high-margin financial technology companies.
Stablecoin Competition Enters New Phase
The downgrade comes as U.S. stablecoin regulation is moving toward greater clarity under the GENIUS Act framework. Clearer rules may benefit Circle by validating regulated issuers, but they may also lower barriers for banks, payment companies and fintech giants to compete. Mizuho’s argument is that regulation could expand the market while simultaneously compressing margins.
That is the central tension in Circle’s investment case. USDC has strong brand recognition, regulatory positioning and institutional adoption, but those advantages may not guarantee pricing power if distribution partners demand more yield or if new entrants arrive with better economics.
For investors, the $50 price target signals that Mizuho sees further downside from current levels. The downgrade does not imply a collapse in Circle’s business, but it challenges the idea that stablecoin growth alone justifies a premium valuation. The market must now assess whether Circle can defend both USDC market share and reserve-income margins.
The broader implication is that the stablecoin sector is becoming more competitive and more institutional. As major financial firms enter the market, the business may shift from scarcity-driven issuance to distribution-driven economics. Circle helped define the regulated stablecoin category. Mizuho’s downgrade suggests the next phase may be less about adoption and more about margin pressure.
