Circle Shares Slide Nearly 20% After CLARITY Act Draft Targets Stablecoin Yield

Circle shares fell nearly 20% on Tuesday, sliding back toward the $100 mark after CoinDesk reported that new draft language in the CLARITY Act would prohibit yield on stablecoin balances. The proposal would bar issuers from paying passive rewards simply for holding a stablecoin and would curb structures that resemble interest-bearing deposits. People familiar with the draft reviewed by industry participants on Capitol Hill said rewards linked to user activity could still be permitted, but the framework remains unclear. The change would directly affect stablecoin issuers including Circle. While USDC does not currently pay yield to holders, the restriction would shut off a potential avenue for the product to expand beyond payments into a store-of-value use case, undercutting part of the bull thesis for USDC as a more competitive financial instrument. The pullback follows a strong run in Circle stock. Shares climbed more than 175% from an early-February low near $50 to a recent high around $135 last week. At the time of publication, the stock was trading around $102.85. The draft language is described as a compromise after pushback from the banking sector, which has argued that yield-bearing stablecoins could function too much like deposits and disrupt traditional lending markets. The latest version would allow activity-based rewards but not balance-based rewards, though details on permissible program structures remain unresolved. The CLARITY Act is part of a broader push to establish a comprehensive U.S. market-structure framework for digital assets. A prior version passed the House, and lawmakers are now working to reconcile competing proposals before moving the bill through the Senate Banking Committee. For stablecoin issuers, the legislative outcome remains a key overhang. If enacted with the yield restriction intact, it could constrain how products like USDC compete with newer yield-bearing alternatives and influence capital flows across the digital-asset ecosystem.