The shares of major cryptocurrency firms Coinbase (COIN) and Circle Internet Group (CRCL) experienced significant declines following the circulation of a revised draft of the U.S. stablecoin legislation known as the CLARITY Act. The draft, reported by CoinDesk and confirmed by journalist Eleanor Terrett, proposes a ban on offering yield "directly or indirectly" on stablecoin holdings, including anything "economically equivalent to interest."
Coinbase stock fell approximately 8-10%, while Circle's stock plunged as much as 18-20%, with the latter's drop snapping a rally of over 170% since early February. The proposed rules would apply broadly across exchanges, brokers, and their affiliates, though limited activity-based rewards like loyalty programs would still be permitted. The legislation would direct regulators including the SEC, CFTC, and Treasury to define the specifics within one year of passage.
The bill, authored by Senators Angela Alsobrooks (D-Md.) and Thom Tillis (R-N.C.), has sparked concern because it directly targets a key revenue driver for both companies. Coinbase earns revenue from interest on USDC reserves and offers customers a 3.5% yield on their USDC holdings. Circle's entire business model is built around the issuance of USDC, the second-largest stablecoin, generating revenue from the reserves backing it.
Analysts were quick to assess the potential damage. Mizuho analyst Dan Dolev stated a ban could "reduce the use case for Circle in the near-term" and make USDC less attractive on Coinbase's platform. Shay Boloor, chief market strategist at Futurum Equities, argued the restriction "weakens a key part of the bull case" for USDC becoming a true store-of-value asset.
Despite the negative reaction, not all analysts are bearish. Citi analyst Peter Christiansen maintained a Buy rating on Coinbase with a $400 price target, framing COIN as a "beta play on CLARITY" that could benefit from regulatory clarity in the long term. The broader Wall Street consensus on COIN remains Moderate Buy with an average price target of $266.15. The sell-off also affected other crypto-linked equities, with Robinhood (HOOD) falling 4.7%.
Negotiations between lawmakers, crypto firms, and banking executives were ongoing as of March 24, with meetings held on March 23 and 24. Some insiders have noted the current language is vague enough to be interpreted aggressively by future regulators. Coinbase CEO Brian Armstrong had previously withdrawn support for an earlier version of the act when a yield ban was floated.
