By Joe Light

Tech and payments companies including Visa, Stripe, Mastercard and Coinbase Global on Tuesday announced they're part of a consortium forming a new stablecoin called Open USD. The stocks of Circle Internet Group and Coinbase, which partner on a stablecoin threatened by the venture, are plummeting.

Circle stock as of late Tuesday morning traded down nearly 14% to $65.39, while shares of Coinbase dropped 6% to $142.37.

Stablecoins are a type of cryptocurrency whose value is typically pegged to the U.S. dollar and backed by safe assets such as bank deposits or Treasury bills. For years USDC, which Circle and Coinbase co-founded, has reigned as the largest U.S.-based stablecoin. As of Tuesday there was about $73.6 billion in outstanding USDC.

The new venture could be a direct threat to that dominance. In the announcement for Open USD, Open Standard — the company launching the token — said that more than 140 businesses were partnering on Open USD and that the token would launch later this year. In addition to payments companies, the partners include asset managers such as BlackRock, tech firms such as Alphabet's Google and IBM, and crypto firms such as Ripple and — perhaps most surprisingly — Coinbase itself.

Open Standard said the new token can be minted and redeemed at no cost and earnings from Open USD's reserves will be split among the coin's adopters after covering operational costs.

Stablecoins have traditionally been used to trade for Bitcoin and other cryptocurrencies. They've also caught on as a low-cost alternative for remittances and as an easy way for consumers in countries with high inflation to protect their spending power. Circle and other crypto firms have bet on the idea that stablecoins will also be used in everyday payments, and lately Circle executives have touted their potential use in payments by artificial intelligence-powered "agents."

If the token catches on, it would be a direct challenge to Circle's USDC. Right now, Circle and Coinbase split the revenue from USDC's reserves. Coinbase's subscription and services segment, which included USDC-tied revenue, made up 44% of the company's overall revenue in the first quarter. Though it is broadening its services, USDC is essentially Circle's core product offering.

"USDC remains the most trusted, widely adopted, institutional-ready stablecoin in the world, and we count thousands of institutions as partners in our ecosystem across nearly every major sector," Circle CEO Jeremy Allaire wrote in an X post on Tuesday, adding that the company welcomes competition in the space.

"Coinbase's view has always been that dollar-denominated stablecoins are a rising tide: more issuers, more use cases, and more distribution means more people using stablecoins. USDC remains a cornerstone of our platform," a Coinbase spokesperson said.

Write to Joe Light at joe.light@barrons.com

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