How stablecoin yield restrictions could affect Circle, Coin

Reports that the Clarity Act could ban yield payments on passive stablecoin holdings shook some crypto stocks on Tuesday. Since then, equity analysts have assessed the implications, particularly for Circle Internet (CRCL), the firm behind USDC stablecoin, and crypto exchange Coinbase Global (COIN).
Under the proposed legislation, analysts expect that firms would still be able to pay rewards or yield on stablecoin activity. As currently understood, this restriction on passive yield could dampen demand for holding stablecoins long term.
Mizuho analyst Dan Dolev actually expects the restriction to boost Coinbase’s (COIN) near-term profitability, noting that about 20% of the exchange’s revenue is currently paid out in rewards. However, eliminating those payments would reduce the incentive to hold USDC on the platform.
For Circle (CRCL), Dolev sees the prohibition as a “headwind to market cap,” though a recent increase in adjusted volumes implies that use cases “are starting to proliferate, which is a positive for the long-term.”
Citi analyst Peter Christiansen believes real-world applications will remain unaffected. “We also do not believe this development thwarts real-world use cases for stablecoins, including cross-border payments or agentic commerce,” he wrote. “Time will tell, but the concern for secondary market liquidity (on/off ramps) could temper payments adoption, placing increasing importance on the emergence of liquidity hubs, including CPN (Circle Payments Network).”
Morgan Stanley analyst James E. Faucette also ties long-term value to emerging applications. “We believe the core potential of Circle lies in future use cases, which are nascent in monetization, such as usage of stablecoins by AI agents, use cases in collateral management/tokenized trading, and cross-border payments,” he wrote.
Faucette outlined both sides of the equation for Circle (CRCL). On the positive side, the company would retain more interest income from reserves, face lower chances of price wars over stablecoin yield, and see reduced yield-chasing behavior. On the negative side, the prohibition creates a disincentive for holding USDC long term—currently Circle’s primary revenue driver. It also weakens stablecoin’s competitive position against tokenized money market funds and could hurt industry growth and institutional demand.
Darren Wang, founder and CEO of OwlTing Group, the operating brand of OBOOK Holdings (OWLS), views the restriction as an incentive to increase stablecoin usage rather than a setback.More people are starting to recognize that a stablecoin’s long-term value does not come from functioning like a passive savings product. It comes from velocity and real-world usage,” he said, adding that these proposals appear aimed more at passive holding structures than at incentives tied to actual network activity like payments, settlement, and cross-border transactions. “I don’t view this regulatory shift as a setback. Clearer guardrails are often what enable deeper institutional trust.”
Not everyone shares that optimism. Ryne Saxe, co-founder and CEO of Eco, a stablecoin liquidity layer, sees the proposed legislation as banks protecting their market share. “Drafters and banking industry lobbyists will chalk this up to ‘competitive fairness.’ But let’s call it what it is: protectionism against the biggest competitive threat they’ve ever faced,” he said, suggesting that creating a custom bank charter process atop GENIUS would have been a better approach.
Needham analyst John Todaro isn’t surprised by the development. “This recent language iteration has been considered as a potential base case for Clarity for some time,” he said regarding his discussions with impacted companies.
Circle (CRCL) stock gained 1.4% in late Wednesday trading after a 20% slide on Tuesday. Coinbase (COIN) slipped 0.2% in late Wednesday trading after falling 9.8% in the previous session. OBOOK Holdings (OWLS) climbed 3.5%, erasing a 3.7% drop on Tuesday.