Woofun AI reports that a new initiative named Open USD has emerged to challenge the dominance of incumbent issuers like Circle by fundamentally altering how stablecoin reserve earnings are distributed. Authored by Blockchain Knight under the Open Standard framework, this proposal seeks to shift profits from the issuer to the partners driving actual usage, sparking intense industry debate regarding the future of the sector.

The economic mechanism driving this initiative allows participating entities to mint and redeem tokens for free without any volume limits, effectively bypassing traditional barriers. Payment processors, exchanges, DeFi protocols, and other infrastructure providers would share the earnings after small management fees are deducted based on their specific usage levels. The breadth of corporate backing is substantial, with a coalition of 140 companies supporting the project, including industry giants such as Visa, Mastercard, Stripe, Coinbase, BlackRock, and Google.

Structurally, the launch is scheduled for the second half of 2026, though details regarding supply, custodians, and redemption processes remain undisclosed. This timeline aligns strategically with recent legislative actions by the Senate Banking Committee, which passed a law prohibiting passive interest or earnings on stablecoins for restricted U.S. users while permitting rewards based on actual transaction activity. Open USD exploits this specific business model gap by refusing to pay interest to token holders and instead returning earnings to companies that facilitate transactions, transforming regulatory pressure into a strategic advantage.

The financial impact on Circle is projected to be severe, as reserve earnings from USDC constitute the cornerstone of its business model. Per Woofun AI, Circle's 2025 earnings report revealed that USDC contributed 96% of its total revenue, with a significant portion flowing to distribution channels. In 2025 alone, Circle paid Coinbase $1.4 billion in distribution fees, while Coinbase generated approximately $1.35 billion in stablecoin-related revenue, representing nearly 20% of its total annual revenue.

Coinbase's strategic position as a major stakeholder amplifies the disruption, given that it holds over 25% of all circulating USDC. When Coinbase, the largest distributor of USDC, joined the Open USD camp, the market reacted immediately, causing Circle's stock price to fall by 16% on the day of the announcement. This sharp decline underscores the market's perception of the threat posed by the departure of such a critical partner.

In response, the Circle CEO defended the company's position by arguing that stablecoins are typical network-effect businesses where liquidity, integration depth, and regulatory compliance create a winner-take-all dynamic. USDC handled nearly $30 trillion in on-chain transactions in the first quarter of 2026, accounting for 80% of all dollar-pegged stablecoin transactions on-chain, a level of activity that cannot be replicated overnight simply by having a list of 140 companies behind a new project. The CEO further noted that large alliances have historically struggled with coordination and decision-making, making it difficult to innovate continuously in the fast-paced crypto market, and emphasized that convincing merchants requires low costs and seamless compliance rather than just partnership agreements.

A more critical variable is the underlying negotiation dynamics between Coinbase and Circle regarding their contract expiration. Coinbase is now on the other side of the negotiation table, a move that is not hard to predict given that its revenue-sharing agreement with Circle expires every three years, with the next deadline in August this year. Participating in a competitive stablecoin project as a founding member serves both as a way to hedge risks and as a powerful bargaining chip in upcoming talks.

Ultimately, Open USD remains a proposal that must prove its viability through actual supply levels and real on-chain traffic after launch. If it fails to deliver, this announcement will merely serve as an industry stress test, indicating that traditional giants may indeed be feeling urgent pressure to adapt to a shifting landscape.