Mizuho Warns Circle's Bank Approval Fails to Address USDC Challenges

Japanese investment bank Mizuho has reiterated its neutral rating on Circle, the issuer of the USDC stablecoin, following the company's recent approval from the Office of the Comptroller of the Currency (OCC) to establish a national trust bank named First National Digital Currency Bank. Mizuho claims that while this regulatory approval is a positive move for Circle, it does not address the persistent challenges facing USDC, which include its declining market capitalization and increasing competition.

According to Mizuho analysts led by Dan Dolev, USDC's market capitalization has decreased since March 2026, raising concerns regarding its growth trajectory. Notably, they observed that the circulating supply of USDC dropped by approximately $7 billion from its peak, amounting to about $74 billion as of July. This contraction represents the largest monthly decline observed since 2022, aligning with a broader trend of reduced liquidity in the stablecoin market.

Mizuho's report highlights the emergence of new contenders such as Open USD, a consortium-backed stablecoin developed under the GENIUS Act, which may intensify competition for Circle. This project involves significant firms including Mastercard, Stripe, and Coinbase, and its arrival could commoditize the stablecoin market, emphasizing the challenges that Circle may face despite its regulatory approval. The analysts stated, "we believe the market reaction is likely overly optimistic, as this does not resolve fundamental issues that have been hurting the stock recently."

The latest evaluation of Circle's prospects comes as its stock briefly rose by 5% following the OCC approval, only to lose most of those gains, trading down by 4.7% to $63.03. Mizuho continued to express caution, stating, "We remain on the sidelines," reflecting their skepticism about Circle's ability to sustain its market position amid these growing challenges.