Coinbase and Circle Fall as Senate Fails CLARITY Act, Fed Rate Hike Looms

Coinbase and Circle's shares fell around 10% on Tuesday following the Senate's failure to advance the CLARITY Act, which would have established a clearer regulatory framework for digital assets. The Fed is now set to decide interest rates, with markets expecting a 25-basis-point increase. This move could lift the federal funds target range from 3.50%-3.75% to 3.75%-4.00%. Circle and Coinbase's stablecoin economics are directly affected by interest rates.

Circle backs USDC with cash and short-duration U.S. government securities, earning interest on those reserves. In the second quarter of 2026, Circle generated $668 million in reserve income, but a 66-basis-point decline in average reserve yields reduced that figure by approximately $113.9 million compared to the prior-year period.

Coinbase participates in these economics through its commercial agreement with Circle and receives allocations linked to USDC held on its platform. A quarter-point hike would generally improve the yield environment for USDC reserves, although the eventual earnings effect depends on how quickly portfolio yields reset and whether circulating USDC continues growing.