Circle shares dropped nearly 20% Tuesday, falling toward the $100 level after a CoinDesk report revealed new draft language in the CLARITY Act that would ban yield on stablecoin balances.
The proposed rules would prohibit issuers from offering passive rewards for simply holding a stablecoin and restrict structures that resemble interest-bearing deposits. While activity-based rewards may still be allowed, the framework remains unclear, according to people familiar with the draft reviewed by industry participants on Capitol Hill.
The update directly affects stablecoin issuers such as Circle. Although USDC does not currently offer yield to holders, the restriction removes a potential future pathway for the product to evolve beyond payments into a store of value. That shift weakens the broader bull case around USDC as a more competitive financial instrument.
Circle stock had been on a strong run before the pullback. Shares surged more than 175% from an early February low near $50 to a recent high around $135 last week. The stock was trading near $102.85 at press time following the selloff.
The draft language represents a compromise after pushback from the banking sector, which argued that yield-bearing stablecoins could function too similarly to deposits and disrupt traditional lending markets. The current proposal allows rewards tied to user activity but not balances, though details on how those programs would be structured remain unresolved.
The CLARITY Act is part of a broader effort to establish a comprehensive market structure framework for digital assets in the US. A prior version passed the House, and lawmakers are now working to align competing proposals before advancing the bill through the Senate Banking Committee.
The outcome of the legislation remains a key overhang for stablecoin issuers. If passed with the yield restriction intact, it could limit how products like USDC compete with newer yield-bearing alternatives and shape how capital flows across the digital asset ecosystem.