Circle selloff may miss the mark as Clarity Act targets distributors, not issuers: Bernstein Circle’s shares dropped as much as 20% in Tuesday trading amid concerns over proposed stablecoin yield limits, but analysts at Bernstein argue the market is misreading the implications of the Clarity Act. The proposed U.S. rules, which aim to regulate stablecoins, focus on restricting yield on passive balances held by users rather than targeting issuers like Circle. Bernstein’s analysis highlights a critical distinction: the Clarity Act primarily addresses distributors, such as platforms that offer yield to users, rather than issuers like Circle. The firm’s report notes that Circle earns income through its reserve management, investing $80 billion in short-term U.S. Treasurys to back its USDC stablecoin. This model generates about $2.64 billion in annual reserve income, without directly paying yield to token holders. The proposed rules would bar platforms from offering passive yield on stablecoin balances, similar to bank interest rates. However, activity-based rewards tied to trading or payments would still be permissible, with regulators tasked to define boundaries. Bernstein argues that Circle’s business model falls outside these restrictions, as it does not pass yield to users. The analysts suggest that limiting passive yield payouts could even strengthen Circle’s position by reducing competition from platforms offering aggressive yield incentives. Meanwhile, the immediate impact of the rules is expected to fall on intermediaries like Coinbase, which offers around 3.5% yield on USDC balances. Coinbase shares roughly half of USDC reserve income with Circle, and may need to adjust its rewards structure under the new rules.#coinbase #clarity_act #gautam_chhugani #circle #bernstein
