Circle’s stock fell 20% on Tuesday and Coinbase dropped nearly 10% after a draft of the Clarity Act raised the prospect of strict limits on stablecoin yield, threatening the incentive structure that has fueled USDC adoption over the past year. The proposed legislation, from Senators Angela Alsobrooks and Thom Tillis, would bar rewards on passive stablecoin balances and ban structures “economically equivalent to interest.” It goes meaningfully further than the GENIUS Act, signed into law last July, which prevented stablecoin issuers from paying yield directly to holders but left room for third-party platforms to offer rewards.
Coinbase currently pays 3.5% on USDC held through its Coinbase One program. Kraken offers up to 5%, and Binance pays 5.63%. That pass-through model is exactly what the Clarity Act targets.
Banks have lobbied hard against stablecoin yield, arguing it draws deposits away from traditional institutions. Circle does not pay USDC holders directly, but the rewards ecosystem built by exchanges has become central to its growth story. USDC accounts for roughly 20% of Coinbase’s revenue, and a significant share of that flows back out as user rewards.
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