TLDR
- Circle (CRCL) stock dropped ~20% Tuesday after a draft provision in the Clarity Act would ban platforms from paying yield on stablecoin holdings
- Coinbase (COIN), Circle’s USDC distribution partner, fell 9.1% on the same news
- The proposed ban targets yield paid “directly or indirectly” on stablecoins held in a way that resembles a bank deposit
- CRCL insider Nikhil Chandhok sold 10,000 shares on March 23 at $123.08, ahead of the selloff
- Despite the drop, Circle posted strong Q4 results — EPS of $0.43 beat estimates of $0.25, with revenue up 76.9% year-over-year
Circle Internet Group (CRCL) fell sharply on Tuesday after news broke that a draft provision in the Clarity Act could ban platforms from offering yield on stablecoin balances. The stock dropped around 20% on the day, opening Wednesday at $101.90.
The provision, flagged in an email from the Blockchain Association to its members and reviewed by Barron’s, would prohibit platforms from paying investors — directly or indirectly — solely for holding stablecoins in a way that resembles an interest-bearing bank deposit.
Circle is the issuer of USDC, the second-largest stablecoin by market circulation. Revenue from USDC reserves, held mainly in Treasury bonds and reverse repurchase agreements, is split between Circle and Coinbase, its distribution partner.
Coinbase (COIN) dropped 9.1% on the same day. Coinbase currently offers customers a 3.5% yield on USDC holdings — a product that would be directly in the crosshairs of the proposed restriction.
The compromise language, brokered with input from the White House and senators Angela Alsobrooks (D-MD) and Thom Tillis (R-NC), was being vetted with banks and crypto firms on Monday and Tuesday. Activity-based rewards and loyalty or incentive programs would still be permitted under the draft, but the Blockchain Association said it was seeking further clarity on what counts.
The bill has been in the works for years. Its broader goal is to clarify how digital assets are regulated in the U.S. and exempt most crypto trading from securities laws. The stablecoin yield dispute has been one of several sticking points.
Bank trade groups have long pushed back on stablecoin yields, arguing that they pull deposits away from traditional banks, which typically pay lower rates.
Coinbase CEO Previously Pulled Support
Coinbase CEO Brian Armstrong had previously withdrawn his support for the Clarity Act when an earlier version of the yield ban surfaced. The new compromise is an attempt to find middle ground between bank lobbying and crypto industry pressure.
Even with the yield issue potentially resolved, the bill faces more hurdles. Democrats have pushed to include language banning President Trump and his family from profiting on crypto investments. Republicans have largely blocked that. Those talks are on hold until the yield dispute is settled.
Timing is also a concern. Lawmakers worry the bill may not clear both chambers before midterm campaigning heats up.
Insider Sale and Analyst Views
The selloff came just days after an insider transaction. Nikhil Chandhok sold 10,000 CRCL shares on March 23 at an average of $123.08, for a total of $1.23 million. It was his second sale in recent months — he also sold 20,000 shares in late February at $90.00.
Despite the volatility, Circle’s recent fundamentals were strong. The company reported Q4 EPS of $0.43, well above the $0.25 consensus, with revenue of $770.23 million — up 76.9% year-over-year.
Analyst targets are mixed. Wells Fargo cut its price target from $128 to $111 but kept an “overweight” rating. Robert W. Baird has an “outperform” with a $138 target. The consensus from MarketBeat stands at “Hold” with an average price target of $126.29.
CRCL’s 52-week range sits between $49.90 and $298.99.
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