- JPMorgan warns that Circle's revised revenue-sharing deal with Hyperliquid will pressure USDC earnings in the second half of 2026.
- The launch of Open USD, backed by major payment firms, adds competitive pressure on USDC's market share and margins.
- Despite headwinds, USDC gains institutional traction as Marex Group accepts it as initial margin collateral for derivatives.
- Circle's stock has fallen sharply, but CEO Tarbert emphasizes long-term strategy and regulatory progress.
The stablecoin market is witnessing a period of intense transformation, with Circle’s USDC at the center of both headwinds and breakthroughs. While the digital dollar remains the largest regulated stablecoin by circulation, recent developments have introduced new revenue pressures and competitive threats that are reshaping its near-term outlook.
At the same time, USDC is making inroads into traditional finance, with institutional players embracing it as collateral for derivatives trading. This dual narrative of challenge and opportunity defines the current state of USDC and its issuer, Circle Internet Group (NYSE: CRCL).
Revenue Pressure from Hyperliquid Partnership
JPMorgan has flagged a revised partnership between Circle and Hyperliquid as a key source of near-term revenue pressure. Under the new arrangement, Coinbase classifies USDC on Hyperliquid as ‘on-platform’ and pays 90% of the reserve income to the exchange, whereas previously the revenue was split nearly evenly between Coinbase and Circle. This change is expected to reduce Circle’s share of USDC-related income in the second half of 2026, according to JPMorgan’s estimates. The bank also lowered earnings forecasts for both Circle and Coinbase, citing the agreement and weaker crypto markets, though it noted that higher interest rates could provide some support over the longer term.
Circle’s stock has already felt the impact. Trading at $60.64, the shares have fallen 23.9% over the past month and 74.2% over the past year. The stock is now trading about 50% below the midpoint of analyst target ranges, which span from $50 to $243. The revised Hyperliquid deal adds to the uncertainty around Circle’s earnings mix, making the timing and visibility of future cash flows a key focus for investors.
New Competitor Open USD Enters the Scene
Adding to the competitive pressure, Open Standard has launched Open USD, a stablecoin backed by more than 140 participating businesses, including Visa, Mastercard, Stripe, BlackRock, BNY, and Coinbase. Open USD allows partners to mint and redeem the stablecoin without fees and receive reserve earnings after a management charge. This revenue-sharing model could pressure USDC’s margins and raise distribution costs, according to Mizuho, which cut the Circle price target to $50. Following the Open USD announcement, Circle shares fell 17.5% to $62.63, and the stock was also removed from several Russell Growth indexes.
Circle President Heath Tarbert pushed back on the competitive threat, pointing to USDC’s roughly $73 billion in circulation and native support across 34 blockchains. He argued that these network effects are ‘incredibly hard to replicate’ and that USDC leads in actual transaction volume. However, the stablecoin’s circulating supply has declined from nearly $80 billion in March, reflecting a broader $10 billion contraction in the stablecoin market since May as trading activity cooled and new rivals emerged.
Institutional Adoption: USDC as Collateral for Derivatives
On a more positive note, USDC is gaining traction in institutional finance. Marex Group, a diversified financial services platform, has announced that clients can now use USDC as initial margin (IM) collateral for derivatives transactions. The initiative, developed in partnership with Circle, Coinbase, and Prime Trading, follows a no-action letter from the CFTC in December 2025 that permits futures commission merchants to accept non-securities digital assets as customer margin collateral. Coinbase provides custody, fiat conversion, settlement, and reporting infrastructure. The first transaction involved Prime Trading posting USDC as IM collateral with Marex.
This move allows collateral to move at internet speed, 24/7, rather than relying on traditional banking rails constrained by operating hours and multi-day settlement. Stephen Hood, Head of Clearing, Americas at Marex, said the ability to use USDC as good segregated collateral will enhance capital efficiencies and set the stage for a new wave of innovation. Claire Ching of Circle added that integrating USDC into institutional trading workflows unlocks new levels of efficiency and programmability in collateral management. The development signals growing acceptance of stablecoins in regulated derivatives markets.
Regulatory Progress and Long-Term Strategy
Circle has also made regulatory strides. On July 10, the company received final OCC approval to establish Circle National Trust, a federally supervised trust bank that will initially provide digital asset custody, with USDC reserve management planned as a possible future service. The approval places the entity under direct federal supervision, which could support wider institutional use of Circle’s infrastructure. However, Mizuho cautioned that investors may be overestimating the significance of this milestone.
In a recent interview with FOX Business, Tarbert defended Circle’s long-term strategy, emphasizing that management is focused on building financial infrastructure rather than reacting to short-term stock movements. He argued that successful execution would eventually support shareholder value and that the stock should ‘take care of itself’ if Circle delivers on its wider mission. With USDC facing both revenue headwinds and new adoption channels, the coming quarters will be critical in determining whether Circle can balance these forces.
The stablecoin landscape is evolving rapidly, with USDC caught between competitive pressures from Open USD and revenue-sharing changes with Hyperliquid, while simultaneously breaking new ground in institutional collateral use and regulatory approval. Circle’s ability to navigate these crosscurrents will depend on how effectively it can leverage its network effects, regulatory advantages, and partnerships to offset near-term earnings pressure. Investors and market participants will be watching closely for updates on USDC revenue impact and management’s strategy to sustain growth.
