150 companies in the alliance back OUSD, yet why can't it shake USDT and USDC?

Original article by ARK Invest Director of Digital Asset Research Lorenzo Valente

Compiled by Odaily Planet Daily & Qin Xiaofeng (@QinXiaofeng 888 )

Editor's Note: Over the past week, more "negative news" has emerged regarding the stablecoin coalition project Open USD, with some participating members denying any partnership, casting a shadow over the project's prospects. Today, ARK Invest Director of Digital Asset Research Lorenzo Valente published an analysis dissecting the weaknesses of OpenUSD and emphasizing the first-mover advantages of USDT/USDC.

He argues that stablecoins succeed on deep liquidity, usage habits, and integrated ecosystems, not on coalitions or revenue sharing. Giants like Binance will not risk their core trading business, which depends on USDT liquidity, for OUSD's spread income; coalition members have divergent incentives, and OUSD overestimates the ability of a shared economy model to disrupt established network effects.

It is important to note that Lorenzo Valente's institution, ARK Invest, added $44 million worth of Coinbase stock and $25.25 million worth of Circle stock in June. Below is the full text of Lorenzo Valente's original article, compiled by Odaily Planet Daily.

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The launch of OUSD has caused a stir on social media. Many are now convinced Circle is doomed, because a coalition of 150 companies—spanning payments, fintech, banking, crypto infrastructure, and consumer tech—will crush the competition by launching a stablecoin that can compete with USDC and perhaps even USDT.

I've already posted a thread explaining why people are severely overestimating this move, and why coalitions are a terrible organizational structure for conquering anything, let alone a market that has already formed a duopoly. In this short article, I want to focus on one thing: the true network effects of stablecoins. I won't repeat every argument, but instead elaborate on a specific example that everyone is overlooking, because I believe both USDT and USDC possess deeply misunderstood and undervalued liquidity moats.

The network effects of stablecoins are not created by a long list of logos. They are created by liquidity, usage habits, collateral acceptance, integrations, brand recognition, market depth, settlement processes, and the fear of disrupting what already works.

This is why I believe Tether and Circle are two deeply misunderstood companies.

First, the obvious point: OUSD will comply with GENIUS requirements, meaning it cannot directly share yield with users. This isn't news, yet people are still shouting at Circle to pay yield to stablecoin holders, as if OUSD could do that. The reality is the opposite: Circle is likely the issuer that passes the most yield upstream to platforms and ultimately to end users in the market.

This is important because many claim OUSD will create a fundamentally different yield product for end users. But that's not its model. The model isn't "paying yield to stablecoin holders," but "sharing the economic yield of reserve assets with the platforms and businesses that distribute and use the stablecoin."

That is an important distinction.

The strongest argument I've seen for OUSD is that coalition members will have strong incentives to deeply embed OUSD into their businesses, because they can earn a revenue share from this structure. Without knowing the specific details, let's assume its economic model is similar to coalitions we've seen before: the operating company, Open Standard, retains a 25 basis point (bps) management fee, while each participant retains 100% of the net interest margin (NIM) generated by any OUSD on its platform, network, or protocol.

On paper, this is a deal anyone would sign immediately. But it completely ignores the fact that these companies capture value in other ways, and in many cases, their core businesses depend on the existing liquidity and network effects of USDT, USDC, other stablecoins, or simply other fiat currencies.

The incentive to chase the NIM on stablecoin reserves is only attractive if it doesn't jeopardize much larger revenue streams. That's the key point.

The best case study in the industry, and arguably the strongest counter-argument to OUSD, is Binance.

Binance is the largest exchange by a wide margin. It originally had its own branded stablecoin, BUSD, whose supply peaked around $23 billion before the New York Department of Financial Services (NYDFS) ordered issuer Paxos to wind it down in February 2023.

Look at the top three Asian exchanges, and you get three clear case studies. Today, Binance holds approximately $45 billion in USDT, Bybit holds about $4 billion, and OKX holds about $9 billion. Binance has been and remains Tether's stronghold and crown jewel; USDT is consistently the most liquid trading pair on the world's largest exchange.

Today, if you want to buy BTC, ETH, SOL, or open large perpetual positions, USDT remains the dominant quote currency in the offshore exchange ecosystem, and Binance helped realize this reality. USDT is embedded in the deepest order books, the most liquid trading pairs, the most active derivatives markets, and importantly, the workflows of market makers and traders.

That is the real network effect.

Now, many of you are probably thinking: Why is CZ so naive? Why didn't he call Paolo and Giancarlo to demand at least a portion, if not most, of the yield on USDT? Binance knows it has immense bargaining leverage here.

The reason this never happened is extremely simple: From a revenue and enterprise value perspective, Binance's crown jewel is its trading business, and this trading business is fortified by USDT liquidity.

Here's a calculation showing why it's perfectly rational for CZ not to chase the NIM, or try to replace USDT with a more "aligned" stablecoin. The rough estimates below are based on on-chain data and assumptions, none of which are confirmed information.

Building from the bottom up:

• Derivatives (core engine). Binance accounts for roughly 40% of global crypto derivatives volume. Across the cycle, average daily volume is around $40-50 billion, annualizing to about $10-15 trillion. A blended taker/maker fee, considering VIP discounts and BNB rebates, is likely around 5 bps. This alone yields ~$5 billion annually just from perpetuals and futures.
• Spot. Average daily volume is about $8-10 billion, annualizing to ~$3 trillion, with a blended fee around 15 bps (much lower than Coinbase's retail rates due to Binance's VIP-heavy user base and zero-fee promotions). That's another ~$5 billion.
• Other businesses. Spread on wealth management and lending, margin interest, Launchpool and listing economics, Binance Pay, staking commissions, plus float: they sit on ~$46 billion in customer stablecoins. While they don't pool and deploy them like a broker-dealer, corporate treasury and yield-bearing products around these funds are significant at these interest rates. Add in the BNB ecosystem economics, and a conservative estimate is another $5-7 billion.

Remember, these are bear market figures. Conservatively, Binance is a ~$17-20 billion revenue business in a bear market, potentially approaching $25 billion in a bull market. An enterprise of this size and quality is likely valued well over $200 billion.

So, why isn't CZ rushing to replace USDT or demand better economic terms from the Tether team?

Because the sole reason Binance is what it is today, with over 300 million customers returning to the platform, is that it's the most liquid venue on the planet. Let's price the deal Binance would actually have to make.

Binance has $45 billion in USDT on its platform. Assume it strikes a deal with OUSD to keep 90% of the yield. At an average Treasury yield of 3.8%, that's ~$1.55 billion annually. That looks enticing until you size it correctly: risking a $25 billion revenue engine for $1.5 billion in upside is something only a madman would do.

The glue holding up Binance's trading castle is USDT. There is no incentive in the world that would make CZ reconsider which stablecoin to champion.

And we don't have to guess, because someone has already tried. Over a year ago, Circle reportedly paid Binance a one-time fee of $60 million, plus ongoing monthly incentives linked to USDC balances on the platform. Despite this, USDC supply on Binance has remained largely flat at around $5 billion.

People severely underestimate the network effects these stablecoins generate for the businesses hosting them. In most cases, the upside is simply not worth risking your core revenue engine.

For an exchange, a stablecoin is more than just cash. It's the quote asset, the collateral asset, the risk management asset, the working capital asset, and the unit of account for millions of traders. Replacing this underlying foundation is not cost-free.

Not all coalition members have the same incentives

Finally, the OUSD coalition includes very different types of businesses, which do not monetize stablecoins in the same way.

Broadly, there are two models.

Model 1 is AUM monetization. These companies and protocols benefit from idle balances, deposits, or float. For them, the economic yield on reserve assets is directly relevant. A lending protocol, wallet, digital bank, or exchange holding large customer balances would care deeply about the NIM generated by stablecoin supply.

Model 2 is transaction turnover monetization. These are payment networks, processors, remittance companies, and commerce platforms that monetize through transaction flow, not idle balances. For them, a stablecoin is more of a payment rail than a balance sheet asset. They likely care more about reliability, cost, compliance, speed, coverage, and customer experience than reserve yields.

An Aave and a Western Union bring something different to OUSD. A DeFi protocol can help create supply by making OUSD useful collateral or a yield-generating liquidity venue. A payment company might pass OUSD through its system and consume it at the edge. That's valuable for turnover, but entirely different from creating lasting supply.

This is why the coalition structure isn't as powerful as it seems. Members may all like the idea of shared economic benefits, but their incentives are not aligned. Some will create supply, some will create turnover, some will integrate deeply, some will experiment, and some may do nothing after the news cycle.

In equilibrium, it's hard to believe all members will have equally strong incentives to promote OUSD; some will do the hard work of driving adoption, others will free-ride. It's the classic coalition problem.

Conclusion: OUSD is not irrelevant. It's one of the more interesting stablecoin experiments we've seen, and its economic model is clearly designed to target the reserve income advantage of incumbents. But the market overestimates how quickly a shared economy model can overcome established liquidity barriers. Stablecoins aren't won with press releases; they are won through deep, repeated, high-trust usage in the places where money actually flows.

This is why USDT remains so powerful. This is why USDC has proven resilient and is growing so fast. This is why OUSD, despite its impressive coalition, faces a much steeper road than the market currently assumes.

The core question is not whether OUSD can offer partners better economics. The core question is whether those economics are valuable enough to justify partners risking the businesses they have already built around other currencies or stablecoins.

In many cases, the answer will be no.