Circle Slides 20% as Clarity Act Draft Targets Stablecoin "Yield"; Tether Moves Toward First Full Audit
Circle (CRCL) shares sank more than 20% on March 24 (U.S. Eastern Time), closing at $101.17 on the NYSE for the stock's steepest one-day drop since listing. Coinbase (COIN), Circle's largest distribution partner, fell nearly 10% to $181.04 on the Nasdaq.
Selling pressure followed the leak of provisions from the latest draft of the Clarity Act. The text would bar digital asset service providers from paying "directly or indirectly" any yield on stablecoin balances, as well as banning arrangements deemed "economically or functionally equivalent to interest." The draft was circulated to crypto industry representatives for review in a closed-door meeting on March 24, with banking representatives slated to review it the following day. Journalist Eleanor Terrett disclosed details in a post, citing an email from a participant.
USDC itself has not paid interest, and Circle has not distributed yield to token holders. Market attention instead centered on Coinbase's role in passing through reserve income to users. Circle's prospectus describes a revenue-sharing framework in which Coinbase receives 100% of the reserve interest on USDC held on the Coinbase platform; for USDC circulating off-platform, Coinbase receives 50% of the reserve interest. Coinbase distributes most on-platform reserve earnings to users via USDC Rewards. A Columbia Law School analysis estimates Coinbase retains only about 20 to 25 basis points of spread, making the program a thin-margin business.
The draft's "direct or indirect" language and the ban on structures equivalent to interest are viewed as aimed at closing this channel. The immediate financial hit to Coinbase could be limited, and the company's incentive to support USDC may persist given its equity stake in Circle and its share of off-platform reserve profits. The larger issue is demand: USDC Rewards has helped position USDC as a de facto high-yield digital savings product, a factor cited in USDC's faster growth than USDT over the past two years. If yields disappear, user willingness to hold USDC could weaken, slowing supply growth, reducing the pace of reserve accumulation, and pressuring Circle's scale-driven revenue narrative.
The draft keeps an exemption for "activity-based rewards" tied to payments, transfers, or platform usage. That carve-out would represent a different product from today's "hold-to-earn" model. The phrase "economically or functionally equivalent to interest" is also seen as broad, leaving room for future interpretation that could narrow permissible reward structures.
A separate development the same day added to pressure on Circle's positioning. Rival stablecoin issuer Tether said it has hired one of the Big Four accounting firms to conduct its first full financial audit, including USDT reserves. Circle has long leaned on a compliance and transparency narrative, supported by regular reserve attestations from top accounting firms, as a differentiator for institutional clients and compliance-sensitive platforms. Tether has historically relied on quarterly attestations rather than a full audit; S&P Global downgraded USDT's credit rating to "weak" in 2025 and warned about potential collateral shortfalls if Bitcoin prices fall further.
The GENIUS Act requires large stablecoin issuers to undergo annual independent audits, and Tether's move is widely viewed as responsive to that obligation. The audit has not yet been completed and outcomes remain uncertain. Still, a successful audit would likely compress Circle's perceived compliance premium, a key driver cited behind USDC's recent growth outperformance.
Circle's model has benefited from yield incentives that encourage USDC holdings, expand the reserve pool, and support revenue via reserve interest. The Clarity Act draft challenges that premise by pushing stablecoins toward a payments utility rather than an interest-bearing savings-like instrument. Without yield, USDC growth would need to come from organic adoption in real-world payments—a slower and less predictable path. The message from policymakers is increasingly explicit: stablecoins may be allowed to exist, but they should not pay interest.
