Jefferies has advised investors against buying the dip in Circle (CRCL) shares, citing growing competition from the newly announced Open USD stablecoin consortium. Circle shares dropped 17% on Tuesday before recovering 5% on Wednesday, but the investment bank believes the risks are not fully priced in. Open USD is backed by over 140 firms including Stripe, Coinbase, Visa, Mastercard, and BlackRock, and plans to share reserve income with participants, potentially attracting payment providers away from USDC. Jefferies analysts noted that Circle's revenue stream, heavily dependent on interest from USDC reserves and its partnership with Coinbase, faces new threats as Coinbase's involvement in Open USD could eventually divert support away from USDC. Circle CEO Jeremy Allaire and ARK Invest's Lorenzo Valente pushed back, arguing that USDC's established network effects, regulatory approvals, and infrastructure provide a durable competitive advantage. They expressed skepticism about the consortium model's ability to coordinate effectively among many rivals. The commercial agreement between Circle and Coinbase is reportedly up for renewal in August, adding further uncertainty.

Key facts

• Jefferies warns against buying Circle dip, citing competition from Open USD stablecoin consortium.
• Open USD backed by over 140 firms including Stripe, Coinbase, Visa, Mastercard, BlackRock.
• Circle's revenue depends on USDC reserves interest and Coinbase partnership; agreement up for renewal.
• Circle CEO argues USDC's network effects and regulatory approvals are difficult to replicate.
• Skepticism over consortium model's ability to coordinate among many rival participants.

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