TLDR
- Circle shares fell nearly 20% after draft CLARITY Act language targeted yield on stablecoin balances.
- USDC does not pay yield now, but the draft could block future reward features for holders.
- Banking industry pushback shaped draft rules that separate activity rewards from balance-based returns.
- Circle stock pulled back after rising more than 175% from February lows to last week’s peak.
- Lawmakers are still aligning digital asset bills before the measure moves through the Senate.
Circle shares fell nearly 20% and moved toward $100 during Tuesday trading. The selloff followed a CoinDesk report on draft CLARITY Act language that would ban yield on stablecoin balances. The move hit Circle as lawmakers continue shaping new digital asset rules.
Draft stablecoin rules pressure Circle shares
The draft would stop issuers from paying passive rewards for simply holding a stablecoin. It would also limit products that look like interest-bearing deposits. That change matters for Circle because USDC remains central to its business.
USDC does not offer yield to holders today. Still, the draft could block a future product path for the stablecoin. That prospect weighed on investor sentiment and pushed Circle stock lower.
The market reaction reversed part of Circle’s strong run this year. The stock had climbed more than 175% from an early February low near $50. It reached about $135 last week before Tuesday’s retreat.
USDC appeal faces new limits under the proposal
The proposed framework still appears to allow rewards tied to user activity. However, people familiar with the draft said details remain unsettled. That leaves issuers and investors waiting for more clarity.
For Circle, the issue goes beyond current USDC features. The draft reduces the chance of turning stablecoin balances into a stronger store-of-value product. It also narrows one path to compete with newer yield-bearing alternatives.
Bloomberg reported that Circle recorded its biggest intraday decline on record. The stock fell as much as 22% during the session. Other crypto-linked equities also moved lower, including Coinbase.
Banking pushback shapes the policy debate
Banks pushed back against yield-bearing stablecoins during policy talks. They argued that such products could work too much like deposits. They also warned they could pull funds from the traditional banking system.
That pressure helped shape the current compromise inside the draft bill. Lawmakers now appear to favor activity-based rewards over balance-based returns. Even so, the final structure has not been settled.
The CLARITY Act forms part of a wider US digital asset market structure effort. A prior version passed the House, and lawmakers are aligning competing approaches. The bill still needs more work before Senate Banking Committee action.
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