Rich by Coin

CityGroup analysts project that the proposed USDC regulation could slow USDC growth by restricting holder rewards, but they do not expect a material impact on Circle’s core profitability. They note that expansion could decelerate, yet the investment thesis remains intact. The draft would permit limited rewards not akin to bank deposits, while third-party rewards could be banned. City believes Circle’s net income would remain unaffected since earnings from USDC reserves are largely distributed to distribution partners such as Coinbase.

However, reduced rewards could temporarily dampen USDC holdings and downstream liquidity. City emphasizes that adoption should be measured by usage rather than supply, noting that USDC’s size has grown from about $30 billion to $80 billion in two years due to transaction demand rather than rewards.

Circle’s stock has fallen roughly 20% as investors weigh potential regulatory changes to stablecoin yield products. Bernstein argues the decline stems from market misinterpretation of who earns and who pays revenue, noting that the bill would restrict revenue paid to stablecoin holders while Circle does not pay holders directly. Coinbase could face pressure due to its roughly 3.5% USDC yield offering. Circle reported about $2.64 billion in reserve earnings for fiscal 2025, with Bernstein and City setting price targets of $190 and $243 respectively.