CLARITY Act Draft Sends Circle Stock into a Tailspin

Circle's stock plummeted 20% on Tuesday after draft language from the U.S. CLARITY Act emerged, targeting stablecoin rewards.

The proposed restrictions would bar crypto exchanges from offering rewards on passive stablecoin holdings and limit access to transaction size data, making it harder for platforms to calculate reward payouts.

Mizuho analyst Dan Dolev stated that removing rewards would make holding USDC on Coinbase less appealing over time, as 'USDC accounts for about 20% of Coinbase's revenue, and a large part of it is paid out as rewards.'

Circle currently relies on a pass-through structure, earning interest on the assets backing USDC and sharing that income with Coinbase. However, the CLARITY Act's draft would ban any arrangement considered 'economically equivalent to interest,' effectively targeting that structure directly.