Circle Stock Crashes 18% as New Law Threatens Stablecoin Rewards!

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Circle stock plunges 18% as a new draft of the Clarity Act threatens stablecoin rewardsMarkets

What to know:

  • Circle shares fell as much as 18%, and Coinbase dropped about 8%, after a draft of the U.S. Clarity Act raised the prospect of strict limits on stablecoin yield.
  • The proposed legislation would bar rewards on passive stablecoin balances and ban structures “economically equivalent to interest,” threatening a key incentive that has fueled USDC adoption.
  • The sell-off hit Circle after a 170% rally since early February and came as rival Tether moved to bolster confidence by hiring a Big Four accounting firm for a full audit of its USDT reserves.

In this article

BTCBTC$69,735.27◢1.16%

Shares of Circle, the company behind the stablecoin USDC, dropped sharply on Tuesday. This came after a proposed U.S. law on stablecoins suggested potential restrictions on the interest rates they can offer.

Shares of the company behind the USDC stablecoin fell as much as 18% at the start of trading in the U.S., ending a several-week period of growth that had more than doubled its value. Coinbase (COIN), a crypto platform that benefits from the stablecoin’s revenue, also saw its stock price drop around 8%.

Analysts say the main reason for this change is the newest version of the Clarity Act, as covered by CoinDesk, which would limit rewards earned on stablecoin holdings.

According to Mizuho analyst Dan Dolev, the Clarity Act might prohibit rewards earned just for holding stablecoins, and it could also limit any system that functions like a traditional bank deposit.

Earning rewards with stablecoins, either by lending them or through platform bonuses, has been a key reason investors have been interested. Removing these rewards could make it difficult for tokens like USDC to become more than just a way to make payments.

This challenges a central argument for why USDC would succeed,” explained Shay Boloor, market strategist at Futurum Equities, adding that it restricts USDC’s potential to function as a reliable long-term store of value.

The GENIUS Act restricted stablecoin issuers from directly paying interest to users. However, companies have found ways to share the income earned on the assets backing their stablecoins. For example, Circle earns interest on the assets that support USDC and shares that income with Coinbase, which then uses it to offer rewards to users.

According to Keyrock’s digital asset researcher Amir Hajian, the newest version of the Clarity Act aims to discourage stablecoin ownership by prohibiting any fees or rewards that function like interest. This would remove a major reason people hold these digital currencies.

Hajian explained that this development undermines the current system that’s been helping stablecoins gain popularity.

In other news, Tether, the company behind the USDT stablecoin, announced it has engaged a major accounting firm – one of the ‘Big Four’ – to finally conduct a comprehensive audit of its reserves. A successful audit could boost confidence in USDT, especially among larger investors, and potentially attract users away from its competitor, USDC.

The recent drop in price follows a period of significant growth for Circle shares, which had increased by 170% since early February. This impressive gain outpaced other companies in the crypto industry and the overall stock market, making the stock susceptible to a decline with any unfavorable news.

According to Clear Street analyst Owen Lau, things aren’t as dire as initial reports suggest. He believes the market is overreacting, often responding quickly and dealing with the consequences later.

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2026-03-24 19:25