WASHINGTON, March 27, 2026, 08:39 EDT
Some analysts argue Circle Internet Group’s drop tied to the CLARITY Act may be overdone. The latest Senate draft zeroes in on rewards for simply holding stablecoins, not the reserve yield that goes to issuers—a detail that slipped past parts of the market. Both Bernstein and Citigroup flagged the confusion: investors mixed up token platform rewards with yields distributed by the company itself.
Stablecoins—crypto tokens tied to a fixed value, usually $1—are now squarely in the center of a persistent policy fight in Washington. Congress passed the GENIUS Act, shutting down the option for issuers to pay interest directly to holders. The unresolved question: Are exchanges and other intermediaries still allowed to offer yields similar to those at banks? Coinbase
The Senate Banking Committee’s draft would prevent digital asset service providers from offering interest or yield simply for holding a payment stablecoin. However, the text leaves room for rewards tied to activities—think transactions, payments, transfers, wallet or platform usage, loyalty, liquidity provision, and staking.
One line in the draft has analysts talking: if a permitted stablecoin issuer isn’t directly operating a rewards program, it won’t be seen as paying yield or interest—even if an outside party independently offers token-linked rewards. This wording is fueling arguments that Circle may have come under tighter scrutiny than it deserved.
Investors ditched the sector again this week. Circle tumbled 20% on Tuesday—a record one-day fall. Shares of Coinbase slid 9.8% as the appeal of the stablecoin-rewards play faded for speculators.
Bernstein analysts Gautam Chhugani, Mahika Sapra, Sanskar Chindalia, and Harsh Misra spotted what they call a core confusion: “who earns yield” versus “who distributes yield.” Their note puts it plainly: “Circle earns. Coinbase distributes.” And they warn, “market knee-jerk reaction may not be calibrated.” TradingView
Citigroup, in a note on the draft, warned that tighter rules on rewards threaten to slow USDC’s growth, though Circle’s core economics wouldn’t take a hit. Last month, Circle disclosed reserve income had jumped 69% in the fourth quarter to $733 million, fueled by interest from assets backing USDC. For the year, total revenue plus reserve income reached $2.7 billion.
Coinbase stands out for its direct USDC yield. The platform advertises a 3.35% rate simply for holding the token, as shown on its USDC page. By the close of 2025, Circle pegged USDC’s circulation at $75.3 billion. Bernstein flagged USDC’s rapid climb over the last two years, swelling from about $30 billion to $80 billion, now trailing only Tether’s USDt among dollar stablecoins. That expansion, they said, owes much to trading, collateral, payments and dollar access—not just the yield.
Yet risks haven’t disappeared. Should rewards drop, Coinbase and similar platforms might struggle to grow balances—those payouts have been instrumental in attracting fresh capital. Banks, for their part, warn that high stablecoin rewards could pull deposits from standard accounts. The larger legislation is facing its own hurdles: lawmakers remain locked in debates over ethics and anti-money-laundering rules, and with midterms looming, backers still need at least seven Senate Democrats to push it over the line.
Right now, the draft draws a pretty wide line: stablecoin balances sitting idle aren’t set to collect any bank-like interest. Payment incentives or activity-based rewards might survive, although for now, it’s anyone’s guess how much of that language will remain after the Senate gets through it.
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