Circle Slides 18% After Draft U.S. Clarity Act Signals Limits on Stablecoin Rewards

Circle (CRCL), the issuer of USDC, sank as much as 18% in early Tuesday U.S. trading, while Coinbase (COIN) fell about 8%, according to CoinDesk. The latest draft of the U.S. Clarity Act would tighten rules around rewards paid on stablecoin balances. The proposal would bar rewards for passive stablecoin holdings and prohibit structures deemed "economically equivalent to interest." Mizuho analyst Dan Dolev said the language could block payments of returns simply for holding stablecoins and restrict arrangements that make such programs resemble bank deposits. CoinDesk noted that the earlier GENIUS Act already prevented issuers from directly paying users returns, but issuers and platforms have still offered rewards via other mechanisms, including distributing income generated by reserve assets. Circle earns interest on assets backing USDC and shares that revenue with Coinbase, which can then use it to reward users. Keyrock digital assets researcher Amir Hajian said the new Clarity Act draft appears to target this "yield passthrough" model by banning arrangements that are "economically equivalent to interest." Separately, Tether, the issuer of USDT, said it has hired one of the "Big Four" accounting firms to conduct a comprehensive audit of its USDT reserves. The selloff comes after Circle shares surged roughly 170% since early February. Clear Street analyst Owen Lau said the market response may have been overdone, with investors also factoring in expectations for higher interest rates. (CoinDesk)