Circle Internet Group and Coinbase suffered their worst combined trading day in months on Tuesday after a draft of the US Clarity Act was leaked, revealing legislative language that would effectively ban yield on passive stablecoin holdings. Circle’s stock, trading under the ticker CRCL, tumbled nearly 20% — marking the company’s worst single session since its IPO in 2025. Coinbase, which shares revenue from USDC and funds its own rewards programmes from that income stream, fell close to 10%.
The specific provision at issue would prohibit digital asset service providers from offering yield “directly or indirectly” on stablecoin balances, or through any mechanism that is “economically or functionally equivalent to bank interest.” The formulation is broad by design, and critically targets the pass-through structures that Circle and Coinbase have built to channel returns to users while technically avoiding labelling them as interest.
Mizuho analyst Dan Dolev described the potential impact plainly: the Clarity Act “could potentially ban yield payments for simply holding a stablecoin and restrict any approach that makes the programme in any way equivalent to a bank deposit.” Amir Hajian, a digital asset researcher at Keyrock, was more direct: “It pulls the rug on the pass-through model that has been driving stablecoin adoption.”
Circle collects yield on the US Treasury holdings backing USDC, shares a portion with Coinbase, and Coinbase uses those funds to offer customer rewards. USDC has grown to a $75 billion circulating supply, with that reward ecosystem serving as a primary incentive for institutional and retail holders alike. Removing it changes the product’s competitive positioning fundamentally.
The political context matters. The compromise language was reached by Senators Thom Tillis and Angela Alsobrooks on March 20, backed by the White House, as a way to unblock broader digital asset legislation. Banks had pushed hard for precisely this restriction, framing stablecoin yield programmes as “shadow banking” that draws deposits away from the regulated financial system.
Rival stablecoin issuer Tether chose the same day to announce it had hired one of the Big Four accounting firms for a full audit of its USDT reserves — a move that, if completed successfully, could erode USDC’s perceived safety advantage at an already vulnerable moment for Circle.
Clear Street analyst Owen Lau counselled patience: “The actual situation doesn’t appear to be as bad as the headline indicates. It looks like an overreaction, but the market tends to shoot first and ask questions later.” Bitwise’s Ryan Rasmussen agreed, noting that Circle remains up more than 30% year-to-date even after Tuesday’s move, and that creative workarounds such as loyalty programmes could replicate similar incentives without falling foul of the prohibition. The legislative language is still draft, and the battle for its final form is far from over.
