Proposed Bill to Limit Stablecoin "Yield-Bearing" Features, Circle Plummets Nearly 20%, Records Largest Daily Decline in History

Stablecoin issuer Circle’s stock price plummeted as a new version of the “Clarity Act” showed potential restrictions on earnings from stablecoin balances.

Circle’s stock dropped as much as 19%, marking its largest single-day decline ever. The previous record was a 15.5% drop on June 27. This decline also dragged down Coinbase, the main distributor of USDC, whose stock fell by 9% at one point.

For stablecoins like Circle’s USDC, earning interest (usually in the form of rewards) is an important incentive for users to hold these assets, similar to earning interest by depositing cash in a bank account. However, the latest draft of the bill would prohibit stablecoin issuers from paying earnings solely based on user holdings. Still, the bill may allow “activity-based rewards,” such as payments, trading, or lending activities involving stablecoins.

Interest on stablecoins has become an increasingly contentious issue in the crypto industry. Banks argue that if crypto apps like Coinbase offer interest, customers might transfer funds out of the banking system.

Meanwhile, Circle’s competitor Tether announced that it has hired an unnamed “Big Four” accounting firm to conduct its first audit of USDT reserves.

According to CryptoQuant, USDT is currently the largest stablecoin by market cap, valued at $184 billion. However, it has been controversial for years: despite Tether’s promise to improve transparency through quarterly “proof reports,” it has never provided a full, formal audit. This has led many investors and regulators to worry that its reserves are not transparent enough or do not meet audit standards.

After successfully completing an IPO last year, Circle gained popularity, and its USDC is generally considered to be more institutional-grade than Tether. It undergoes a comprehensive audit by Deloitte annually and publishes monthly attestation reports. Currently, USDC is the second-largest stablecoin, with a market cap of about $78.6 billion.

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