Circle shares slide 18% as Clarity Act draft targets stablecoin reward programs

Circle (CRCL), the issuer of USDC, slid as much as 18% in early Tuesday U.S. trading, while crypto exchange Coinbase (COIN) fell about 8%, according to ChainCatcher. CoinDesk reported that the latest draft of the U.S. Clarity Act would tighten limits on stablecoin balance rewards. The proposal would bar incentives for passive stablecoin holdings and ban structures deemed "economically equivalent to interest." Mizuho analyst Dan Dolev said the language could prohibit paying returns simply for holding stablecoins and restrict any setup that makes such programs resemble bank deposits. The report noted that while the GENIUS Act previously blocked issuers from directly paying returns to users, issuers and platforms have used alternatives such as reserve-asset revenue sharing. Circle earns interest on assets backing USDC and shares it with Coinbase, which then distributes rewards to users. Keyrock digital-asset researcher Amir Hajian said the Clarity Act's ban on arrangements "economically equivalent to interest" is aimed at this "yield passthrough" model. Separately, Tether, the issuer of USDT, said it has engaged one of the "Big Four" accounting firms to conduct a comprehensive audit of its USDT reserves. The selloff follows a 170% rally in Circle's stock since early February. Clear Street analyst Owen Lau said the reaction may be overdone, with investors also factoring in expectations for interest-rate hikes.