The Essence of Stablecoins Is a War Over Who Sets the Financial Rules

Opinion | July 12, 2026

Author: David Tang, Managing Director, Standard Kepler

Originally published in STHeadline (星島頭條)

Executive Summary

On June 30, 2026, Circle’s stock plummeted 17% in a single day—not because a competitor built a better product, but because the Open Standard (OS) alliance announced Open USD (OUSD), revealing that Circle’s compliance moat was not as impregnable as the market had assumed. The alliance roster reads like a global who’s-who: Visa, Mastercard, BlackRock, Stripe, Coinbase, Google, Shopify, Standard Chartered, BNY, DBS, OCBC, ANZ, UOB, and more.

The deeper story is not about OUSD versus USDC. It is about the evolving nature of stablecoins themselves—from a compromise born of banking exclusion to a superior financial infrastructure that will eventually be superseded by native on-chain fiat. This report traces that evolution, assesses Circle’s position, and explains why the 17% drop is likely short-term emotion, the mid-term outlook is bullish for USDC, but the long-term trajectory points toward obsolescence.

Stablecoins Were Originally a Compromise

The author has been deeply involved in crypto markets since 2017, witnessing USDT depegs and the LUNA collapse firsthand. Stablecoins were born as a workaround: banks refused to serve Bitcoin exchanges. When traders sold Bitcoin, they had no easy way to withdraw fiat. Exchanges issued dollar-pegged tokens so traders could “lock in” dollar value within the crypto ecosystem without touching the traditional banking system. USDT was launched by Hong Kong-based exchange Bitfinex.

The paradox is stark: today, you can buy Bitcoin through regulated financial institutions. Hong Kong’s licensed exchanges connect directly to bank accounts. The original reason for stablecoins’ existence no longer exists.

So do we still need them? Yes—but not the old kind. They now have many names: tokenized deposits, central bank digital currencies (CBDCs). Their essence is on-chain native fiat.

From Compromise to Superior Solution

Stablecoins have evolved from a workaround into a better solution. Traditional banking cross-border transfers still take 1–5 business days, charge $15–50 in fees, operate only during weekday business hours, and offer zero transparency. Anyone who has wired money knows the anxiety: from the moment the bank debits your account, you are constantly asking whether the recipient has received it. Call the bank—they know as little as you do.

Stablecoins, by contrast, operate 24/7, settle in seconds, execute automatically, and cost less than one-tenth of wire fees. More importantly, funds are fully visible on the blockchain throughout the entire journey—something traditional banking cannot offer.

From USDT to USDC: Two Paths, One Profit Model

USDT: The Gray Market Lifeline

Tether (USDT), born in 2014, solved a real problem: allowing crypto traders to lock in dollar value without bank support. Today it dominates with a $187.9 billion market cap, nearly 60% of the stablecoin market. But its reserve transparency has been perennially questioned, and allegations of minting USDT out of thin air to manipulate Bitcoin prices persist. Its loose regulation and borderless nature make it ideal for telecom fraud and illegal gambling. During the pandemic, it rapidly replaced cash in gray industries. USDT has become the lifeblood of the gray economy—an open secret in the industry.

USDC: The Compliance Play

USDC, launched in 2018 by Circle and Coinbase, took the opposite path: compliance as the core selling point. Over seven years, Circle obtained licenses in multiple jurisdictions and became the first stablecoin authorized under the EU’s MiCA framework. USDC reserves are audited monthly by Deloitte. USDC became the bridge connecting DeFi and traditional finance.

Circle’s strategy was clear: use long-established compliance barriers and network effects to entice traditional financial firms into deep participation, becoming the “sole legitimate gateway” to the stablecoin ecosystem. The endgame: when mainstream banks can directly accept USDC deposits and fund companies can use USDC for subscriptions and redemptions, USDC’s mission is accomplished.

Then OUSD arrived, seemingly disrupting the script.

OUSD: Marketing Hype or Real Threat?

OUSD’s pitch is classic crypto marketing: reserve yield returned to all members, no minting or redemption fees, a payment alliance owned and governed by users, with a “strategic partner” roster that reads like a parade of institutional logos. The buzzwords—“community,” “shared governance,” “shared benefits”—are straight out of the 2021 playbook. The author would not be surprised if a governance token announcement follows.

Reality check: On July 3, 2026, South Korea’s Chosun Ilbo reported that multiple Asian companies on the participant list collectively clarified they had not signed any agreement with OS. Riding coattails, or being ridden—everything feels familiar.

The Real Threat to USDC

In the author’s view, OUSD is a project likely to fail. One hundred and forty institutions from completely different industries, of varying sizes, with divergent compliance requirements, do not share a common pain point. Of course, if SWIFT or a national central bank suddenly intervened, OUSD could leapfrog into payment infrastructure, and Circle’s compliance advantage would evaporate. But SWIFT has already announced its own blockchain-based tokenized deposit initiative for 24/7 cross-border transfers—making that scenario unlikely.

Yet the threat OS poses is real in a different way. Its emergence made the market realize that USDC’s network-effect moat is not as deep as imagined. USDC’s advantage comes from traditional financial institutions’ recognition, bought with hundreds of millions in annual compliance costs. This OUSD declaration is essentially a “user mutiny”—and the market largely endorsed it, given that even Coinbase, which holds a USDC revenue-sharing agreement, joined the OS alliance.

The Shared Profit Model

Traditional stablecoins (USDT, USDC) share the same profit model: you deposit $1, the issuer gives you 1 token, then the issuer uses your money to buy U.S. Treasuries and pockets the spread. According to CryptoNews, Tether earned $10 billion in 2025 from this model. Circle’s 2025 annual report shows revenue of $2.747 billion, with reserve income contributing $2.637 billion. In this model, stablecoins are profit centers for issuers. Institutions are Circle’s greatest asset; demanding a share of profits is only natural, and replacing Circle when the time is ripe is not impossible.

The Future of USDC

Global crypto regulation is tightening. From Binance failing to obtain an EU MiCA license, to European compliant exchanges delisting USDT entirely on July 1, 2026, the crypto world is facing a regulatory crackdown. In the future, USDT will retreat fully into the gray zone; accepting USDT will become a competitive advantage for offshore financial centers and non-mainstream financial systems.

After USDT exits the compliant market, USDC will inevitably replace its position. The author expects USDC to claim the top stablecoin market cap within one to two years.

However, the “deposit $1, get 1 token” model remains a compromise. Native on-chain dollars (tokenized deposits + CBDCs) are the ultimate form of stablecoins—the true next-generation financial infrastructure. If on-chain native dollars achieve two conditions:

Seamless cross-bank, cross-border, cross-platform circulation on-chain
Regulatory permission for on-chain dollars to enter DeFi, smart contracts, and automated payment scenarios

Then USDC will be eliminated, and Circle will either disappear or become just another bank. Before native dollars arrive and banks accept the above scenarios, Circle and USDC will function more like Alipay—a buffer zone between banks and DeFi.

The future digital dollar is not an on-chain替身 (substitute) of fiat, but programmable money native to the blockchain—freely circulating, programmable, enabling instant settlement while allowing SMEs and even individuals to directly participate in a SWIFT-like network.

Investment Conclusion

Short-term: The 17% crash is likely emotional and should recover
Mid-term: USDT’s collapse in compliant markets will deliver a massive dividend to USDC
Long-term: The arrival of native digital dollars will eventually relegate USDC to history

Circle’s future stock performance will be a tug-of-war between mid-term tailwinds and long-term headwinds.

This article is for reference only and does not constitute investment advice.

Standard Kepler Research | standardkepler.com