Circle stock drops nearly 20% as CLARITY Act draft targets stablecoin yield

In the wake of a new draft language in the CLARITY Act that would ban yield on stablecoin balances, Circle shares dropped nearly 20% Tuesday and hit $100 level.

The proposed regulations would prevent the issuers from offering passive reward for simply maintaining a stable coin, and restrict structures similar to interest-bearing deposits. Though the framework is still unclear, people familiar with this draft reviewed by industry participants on Capitol Hill say activity-based rewards may still be allowed.

It directly affects stablecoin issuers like Circle, and other stable coin issuesr that are affected by the update. The restriction does not mean that $USDC currently provides yield to holders, but it removes a potential future path for the product to evolve beyond payments into ‘paying money in – store of value’. This shift weakened the wider bull case around $USDC as a more competitive financial instrument.

Until the pullback, Circle stock had been strong. Shares jumped more than 175% from an early February low near $50 to a recent high around $135 last week. stock, which was trading near $102. After the selloff, 85 was reportedly press time after the sale.

The draft text reflects a compromise after pressure from the banking industry that yield-beating stablecoins could work too closely like deposits and disrupt traditional lending markets, which suggested that “the same thing as those of other banks would be done with respect to their respective counterparts.” In the current proposal, rewards tied to user activity are based on reward but not balances (although details of how those programs would be structured remain unresolved).

Another more general effort is enforcing the CLARITY Act, which provides an integrated market structure framework for digital assets in America. Earlier, the House passed an amendment and lawmakers are now working to align competing proposals before moving forward the bill through Senate Banking Committee.

However, the outcome of the legislation remains an important sway for stablecoin issuers. This means that if passed with the yield restriction intact, it could limit how products such as $USDC compete against newer yield-bearing alternatives and shape how capital flows through the digital asset ecosystem.

**Disclosure **Editor*****This article was edited by Estefano Gomez. See our Editorial Policy for details of how we create and review content. ** **

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