Open USD (OUSD) launched on Tuesday with more than 140 corporate backers, raising a pointed question for anyone earning yield on USD Coin (USDC) through Aave.

The new token lets businesses mint and redeem for free and routes its reserve income to partners. That model aims at Circle, yet the effects could reach the decentralized finance (DeFi) markets where USDC earns its keep.

How USDC Earns Yield on Aave

Lenders who supply USDC to Aave do not pay interest to Circle. They earn from borrowers who pay to withdraw USDC from the pool.

Aave ties those rates to utilization, the share of supplied USDC that borrowers have taken out. Once utilization pushes past its optimal point, supply rates climb fast to pull in deposits.

That makes borrowing demand the number that matters. USDC suppliers on Aave’s main Ethereum market earn around 3.4%, according to DefiLlama data, though the rate fluctuates with demand.

The same market paid mid-single digits and climbed near 18% at times in 2024.

Federal law pushes savers onchain in the first place. The GENIUS Act, signed in July 2025, bars stablecoin issuers from paying holders interest.

That stablecoin yield limit leaves lending venues like Aave as the main route to a return. Aave has since opened an institutional lending market for tokenized assets.

Why Open USD Could Pressure Those Yields

Open USD targets the demand side. Its backers include Visa, Mastercard, Stripe, Coinbase, and BlackRock, the networks that route much of the world’s business payments.

The design gives them a reason to switch. Partners keep most of the interest Open USD earns on its reserves. That income generated 99% of Circle’s 2024 revenue, its filing shows.

Coinbase is the clearest test. Circle paid it $908 million in 2024 to distribute USDC. The exchange also keeps every dollar of reserve income on balances held there.

Now, Coinbase backs the rival, and its Circle deal is set to renew in August.

Stripe has gone further and tied its platform to the token.

“Open USD will be the default stablecoin for businesses running on Stripe,” Will Gaybrick, President of Technology and Business at Stripe, said in the announcement.

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Stripe’s weight is not theoretical. Zach Abrams, who now leads Open Standard, cofounded Bridge, the stablecoin firm Stripe bought in early 2025.

If those firms route settlement flows through Open USD, demand that once leaned on USDC could soften. Lower USDC borrowing on Aave means lower utilization, which pulls down supply yields.

Circle built its lead as USDC’s corporate transfer growth outpaced Tether (USDT). Many of those same rails now back the rival. The catch is timing, since Open USD is not fully live and no Aave market lists it yet.

Circle’s Defense and What DeFi Users Should Watch

Circle argues its lead is hard to copy. Chief Executive Jeremy Allaire says scale and liquidity, built over the years, protect USDC.

“Stablecoin networks are platform and network effect businesses that are established over a long period of time, tend towards winner-take-most market structures, and resemble other internet platform utility markets,” Allaire wrote in a post.

USDC still holds deep exchange liquidity and licenses across the US and Europe. It has kept its European regulatory standing even as USDT retreats from the region. Its supply sits near $73 billion, behind USDT at about $184 billion.

History also gives Circle a talking point. Visa, Mastercard, and Stripe once backed Facebook’s Libra project in 2019, then walked away within months as regulators pushed back.

The sharpest immediate damage hit Circle’s stock, not USDC. Circle Internet Group (CRCL) fell about 17% on Tuesday and roughly 40% over the past month.

Its removal from the five major Russell Growth indexes added rules-based selling at the same time.

For DeFi users, the near-term steps are practical. They can track Aave utilization and rates on live dashboards. Spreading deposits across protocols and chains can lower single-venue risk.

Newer onchain yield strategies may also emerge as Open USD rolls out.

The coming months will test one question. Can Open USD pull enough demand from USDC to move Aave’s rates, or will Circle’s head start hold?

Source: BeInCrypto