Mizuho Says Circle’s Bank Approval Doesn’t Fix USDC’s Deeper Growth Problems

Japanese investment bank Mizuho has maintained its neutral rating on Circle Internet Group, arguing that the company’s recent approval to open a national trust bank does not solve the underlying challenges facing its stablecoin business. The Office of the Comptroller of the Currency granted final approval for Circle to establish First National Digital Currency Bank, a development analysts described as positive but not significant enough to change their outlook on the stock.

Stock Gains Fade After Initial Rally

Shares of Circle jumped 5% on Friday following news of the approval, but much of that gain disappeared by Monday, with the stock trading nearly 5% lower at just above $63. Mizuho analysts, led by Dan Dolev, said the market’s reaction appeared overly optimistic given the challenges still weighing on the company.

USDC Supply Shrinks by Billions Since March

A key concern highlighted in the report is the decline in USDC’s circulating supply, which has fallen by roughly $7 billion since peaking in March, dropping to around $74 billion by July. Analysts noted this marks the steepest monthly contraction the stablecoin has experienced since 2022, driven by redemptions outweighing new token issuance. While onchain activity involving USDC has remained relatively strong, the shrinking supply has raised questions about the token’s long-term growth path and its impact on future transaction and reserve income.

Broader Stablecoin Market Also Under Pressure

The pullback in USDC comes as the wider stablecoin sector experienced its largest monthly decline in years during June, reflecting reduced onchain liquidity as crypto markets remained near their lowest levels of 2026.

Rising Competition From Consortium-Backed Rival

Mizuho also pointed to growing competitive pressure from a newly launched, dollar-backed stablecoin created by a coalition of more than 140 financial and technology firms, including major names in payments and crypto. According to the bank, this kind of consortium-driven competition raises the risk that stablecoins become an increasingly commoditized product, making it harder for Circle to maintain its market position even with its new banking charter in place. Mizuho said it continues to stay cautious on the stock for now.