Shares of stablecoin issuer Circle Internet Corp. experienced a sharp decline following the release of a new version of a bill called the Clarity Act, which suggests potential restrictions on earnings from stablecoin holdings.
Circle's stock price dropped as much as 19%, marking its largest single-day decrease on record. The previous record drop occurred on June 27, when shares fell 15.5%. This downturn also negatively impacted Coinbase Global, Inc., a primary distribution platform for Circle's USDC stablecoin, whose shares fell up to 9%.
For stablecoins like Circle's USDC, earning yield—often provided as rewards—serves as a key incentive for users to hold these assets, similar to interest earned on cash deposits in bank accounts. The latest draft of the bill would prohibit stablecoin issuers from paying rewards to users solely for holding the assets. However, the legislation may still permit "activity-based rewards," such as those tied to using stablecoins for payments, trading, or lending activities.
The issue of stablecoin yield has become an increasingly prominent point of debate within the cryptocurrency industry. Banks argue that if crypto applications like Coinbase offer interest, customers may move funds out of the traditional banking system.
Meanwhile, Circle's competitor Tether announced it has hired an unnamed Big Four accounting firm to conduct its first-ever audit of USDT reserves. According to CryptoQuant, USDT is the largest stablecoin by market capitalization, valued at $1.84 trillion. However, it has faced long-standing controversy: despite Tether's commitment to greater transparency through quarterly "attestation reports," it has never provided a full, formal audit. This has raised concerns among many investors and regulators that its reserves may lack transparency or fail to meet auditing standards.
Circle gained significant popularity following its successful IPO last year, and its USDC is widely regarded as more institutionally sound than Tether. It undergoes comprehensive annual audits by Deloitte and publishes monthly attestation reports. Currently, USDC is the second-largest stablecoin, with a market capitalization of approximately $786 billion.