Why can OUSD, an alliance of 150 companies, still not shake USDT and USDC?
Author: Lorenzo Valente
Compilation: Qin Xiaofeng (@QinXiaofeng 888)
Original title: Why can't OUSD, an alliance of 150 companies shake USDT and USDC?
Editor's note: Over the past week, more “negative news” about the stablecoin alliance project Open USD broke out one after another, including participating members denying the partnership, which also cast a shadow over the project's prospects. Today, ARK Invest Digital Asset Research DirectorLorenzo ValenteThe article analyzes the disadvantages of OpenUSD and emphasizes the first-mover advantage of USDT/USDC.
He believes that stablecoins are better than deep liquidity, usage habits, and integrated ecosystems, rather than alliances or revenue sharing. Giants such as Binance will not jeopardize the core trading business that relies on USDT liquidity in exchange for interest spread earnings from OUSD; the incentives of alliance members vary, and OUSD overestimates the ability of the sharing economy to disrupt existing networks.
It should be emphasized that Lorenzo Valente's agency, ARK Invest, increased its stock positions worth $44 million in Coinbase and $25.25 million in Circle in June. The following is the original content of Lorenzo Valente, compiled by Daily Planet Daily.
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The OUSD announcement caused a stir on social media. Many are now convinced Circle is over, as an alliance of 150 companies — spanning the payment, fintech, banking, crypto infrastructure, and consumer tech sectors — will crush competitors to launch a stablecoin that can compete with USDC and possibly even USDT.
I've already tweeted before explaining why people have grossly overestimated this move and why alliances are a bad organizational structure to conquer anything, let alone a market with a duopoly. In this short post, I just want to focus on one thing: the real network effect of stablecoins. I don't want to repeat every argument, but rather expand on a specific example that has been overlooked by everyone, because I believe both USDT and USDC have highly misunderstood and undervalued liquidity moats.
The network effect of stablecoins was not created by a long list of logos. They are created by liquidity, usage habits, collateral acceptance, integration, brand awareness, market depth, settlement processes, and fear of disrupting existing operating systems.
That's why I think Tether and Circle are two grossly misunderstood companies.
First, it's obvious: OUSD will meet GENIUS compliance requirements, which means it can't directly share the benefits with users. This isn't news, but people are still shouting at Circle to pay out profits to stablecoin holders, as if OUSD can do that. The reality is quite the opposite: Circle is likely to deliver the most revenue to the platform in the market, and then to the end user's issuer.
This is important because many people say that OUSD creates a radically different revenue product for end users. But that's not its pattern. The model is not “payment of proceeds to stablecoin holders,” but rather “sharing the economic benefits of reserve assets with platforms and companies that distribute and use stablecoins.”
This is an important difference.
The strongest argument I've seen in favor of OUSD is that consortium members will have a strong incentive to deeply embed OUSD in their business because they can get revenue share from this structure. Without knowing the details, let's assume that the economic model is similar to the alliance we've seen before: the operating company Open Standard reserves 25 basis points (bps) in management fees, while each participant retains 100% net interest spread (NIM) generated by any OUSD on their platform, network, or protocol.
On paper, it's a deal anyone would sign right away. But it completely ignores the fact that these companies obtain value in other ways, and in many cases, their core business depends on the existing liquidity and network effects of USDT, USDC, other stablecoins, or simply other fiat currencies.
Pursuing a stablecoin reserve's net interest spread is only attractive if it doesn't jeopardize larger revenue streams; this is the key point.
The best case study in the industry, and probably the strongest counterexample against OUSD, is Binance (Binance).
Binance is by far the biggest exchange leading in the industry. It initially had its own brand stablecoin BUSD, and the supply of BUSD peaked at around $23 billion before the New York Financial Services Authority (NYDFS) ordered issuer Paxos to shut down the product in February 2023.
Take a look at Asia's top three exchanges, and you'll get three clear case studies. Today, Binance holds around $45 billion in USDT, Bybit holds around $4 billion, and OKX holds around $9 billion. Binance has been and remains Tether's fortress and crown jewel, and USDT has always been the most liquid trading pair on the world's largest exchanges.
Today, if you want to buy BTC, ETH, SOL, or open a large perpetual contract position, USDT is still the dominant quoted currency in the offshore exchange ecosystem, and Binance has helped achieve this reality. USDT is embedded in the deepest order books, the most liquid trading pairs, the most active derivatives markets, and the most important market makers' and traders' workflows.
This is a real network effect.
Now many of you must be wondering: Why is CZ so naive? Why didn't he call Paolo and Giancarlo to ask for at least a portion, if not most, of the USDT earnings? Binance knows it has huge bargaining leverage here.
The reason this never happened is extremely simple: in terms of revenue and corporate value, Binance's crown jewel is its trading business, which is underpinned by USDT's liquidity.
Let's calculate an account to see why CZ doesn't chase net interest spreads (NIM) or try to replace USDT with more “consistent interests” stablecoins, is completely rational. The rough estimates below are based on on-chain data and assumptions, and none of them are confirmed information.
Build from the bottom up:
Derivatives (core engines). Binance accounts for approximately 40% of global crypto derivatives trading volume. Over the entire cycle, the average daily trading volume was approximately $40-50 billion, or about $10-15 trillion per annum. The mixed order/pending order rate after considering the VIP discount and the BNB rebate is approximately 5 basis points (bps). Perpetual contracts and futures alone are around $5 billion a year.
In stock. The average daily transaction volume is around $8-10 billion, with an annualized rate of about $3 trillion, and a blended rate of about 15 basis points (far lower than Coinbase's retail rate because Binance's user structure is heavily biased towards VIP customers and will launch zero-rate promotions). That's about $5 billion more.
Other businesses. Wealth management and borrowing spreads, margin interest, Launchpool and cryptocurrency economics, Binance Pay, pledge commissions, plus floating deposits: they have around $46 billion in customer stablecoins. Although they don't use them as much as broker-dealers, corporate treasury and interest-bearing products surrounding these funds are significant at these interest rate levels. Coupled with the BNB ecological economy, conservative estimates still leave $50-70 billion.
Keep in mind that these are all bear market data. Very conservatively speaking, Binance is a company with revenue close to $170-200 billion in a bear market, and could be close to $250 billion in a bull market. A company of this size and texture is likely to be valued at over $200 billion.
So why isn't CZ rushing to replace USDT or demand better financial terms from the Tether team?
Because Binance has become what it is today, the entire reason more than 300 million customers keep returning to the platform is that it is the most liquid place on the planet. Let's price this transaction that Binance is actually going to do.
There is $450 billion in USDT on the Binance platform. Let's say it makes an agreement with OUSD to distribute 90% of the proceeds to Binance. At an average Treasury yield of 3.8%, that's about $15.5 billion per year. That seems tempting until you measure it correctly: risk a $250 billion revenue engine in exchange for $1.5 billion of upside, and only a lunatic would do that.
The glue that supports Binance's trading castle is USDT. There is no incentive in the world for CZ to reconsider which stablecoin it wants to further cultivate.
And we don't need to guess because someone has already tried it. More than a year ago, Circle reportedly paid Binance a one-time payment of $60 million, plus an ongoing monthly incentive tied to the USDC balance on the platform. Despite this, the USDC supply on Binance is roughly flat at $50 billion.
People have seriously underestimated the network effects of these stablecoins on their bearer enterprises. In most cases, this upside is simply not worth risking your core revenue engine.
For an exchange, stablecoins are more than just cash. It is the unit of measure for quoted assets, collateral assets, risk management assets, working capital assets, and millions of traders. Replacing this underlying foundation isn't free.
Not all league members have the same incentives
Finally, OUSD alliances include very different types of businesses that don't monetize stablecoins in the same way.
There are generally two models.
The first model is asset management scale (AUM) monetization. Such companies and agreements benefit from idle balances, deposits, or floating deposits. For them, the economic return on reserve assets is directly related. A lending agreement, wallet, digital bank, or exchange with large customer balances may be very concerned about net interest spreads (NIM) from stablecoin supply.
The second model is the monetization of transaction turnover. These are payment networks, processors, remittance companies, and commercial platforms that monetize through transaction flows rather than idle balances. To them, stablecoins are more like a payment track than an asset on a balance sheet. They may be more concerned with reliability, cost, compliance, speed, coverage, and customer experience than reserve benefits.
What an aave and a Western Union (Western Union) bring to OUSD are not the same thing. A DeFi protocol could help create supply by making OUSD a useful collateral or as a place of liquidity to generate revenue. A payments company, on the other hand, may circulate OUSD through its system and be rapidly consumed at the edge. This is valuable for trading volume, but it's completely different from creating a lasting supply.
That's why the alliance structure isn't as strong as it seems. The members may all love the idea of sharing the benefits of the economy, but their motivations are not the same. Some will create supply, some will create turnover, some will be deeply integrated, some will conduct experiments, and some may not do anything after the news cycle.
In a balanced state, it's hard to believe that all members will have the same motivation to promote OUSD; some will do the hard work of implementing it, while others will follow the trend. This is the classic alliance 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 for existing participants' reserve income advantage. But the market is overestimating how quickly the sharing economy model can overcome existing liquidity barriers. Stablecoins are not won by means of press releases; they are earned through deep, repetitive, and reliable use in places where funds actually flow.
That's why USDT is still so strong. That's why USDC has proven to be resilient and growing so fast. That's why OUSD, despite impressive coalition support, is facing a tougher path than the market currently assumes.
The core issue is not whether OUSD can provide partners with better economic conditions. The central question is whether these economic conditions are valuable enough for partners to risk disrupting businesses already built around other currencies or stablecoins.
In many cases, the answer will be no.
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