Circle shares fell sharply after draft language in the U.S. CLARITY Act indicated that stablecoin issuers may be barred from paying passive rewards to users simply for holding tokens in their wallets. The stock dropped back toward $100 after trading above $130 last week, showing how quickly regulatory wording can reshape sentiment around stablecoin issuers.
Draft language puts passive reward models under pressure
The proposal reflects concern among lawmakers that some stablecoin features could begin to resemble bank deposits. Under the current draft, passive yield paid just for holding a stablecoin would not be allowed, while rewards tied to user activity may still be possible. Circle’s USDC does not currently offer yield, but the market has long assumed stablecoins could evolve toward products with savings-like features. If the rule is adopted, that path would narrow.
Investors moved quickly after the draft became public. Reports said Circle fell nearly 20% as traders reassessed the company’s revenue outlook, especially income linked to reserves backing USDC relative to its circulating supply. The law is still being discussed and details may change, yet the initial reaction showed that uncertainty alone was enough to trigger a broad repricing.
Competition and crypto market weakness added to the selloff
Pressure on Circle was not coming from Washington alone. Tether, the main rival to USDC, said it plans to pursue a Big Four audit of its reserves. Some analysts see that step as one that could improve confidence in Tether and increase competitive pressure on Circle at a time when the U.S. policy path remains unclear. At the same time, weaker Bitcoin prices were weighing on the broader crypto sector, which added to the downside in Circle shares.
The stock’s recent trading range makes the reversal stand out. Over the past several months, Circle had climbed from around $50 in early February to nearly $135 before the latest move lower. After the announcement, it fell back to just above $100. That swing points to a business highly exposed to legal and regulatory headlines, especially while stablecoin rules are still being written.
Circle continues to build overseas payment channels
Outside the U.S., Circle is still expanding. The company extended USDC payment functionality into Africa through a partnership with Sasai Fintech, and it has also called on European regulators to ease limits on euro stablecoin activity. Those moves suggest Circle is trying to grow practical payment use cases across multiple regions even as domestic policy questions remain unresolved.
Reports also said ARK reduced its Circle position during the rally that came before the selloff. Large-holder repositioning, softer conditions across crypto markets, and uncertainty around the final wording of the CLARITY Act all fed into the decline. For traders and issuers alike, the next key variable is the final text of the bill and whether stablecoin business models will be allowed to include yield-related features at all.