The Circle-Coinbase nexus is being closely watched by analysts and investors as a potential trailblazer of the global crypto economy. Circle Internet Group and Coinbase Global (COIN) have emerged as central figures in the ongoing institutional integration of the digital assets landscape. However, updates about the proposed Clarity Act in March 2026 caused significant declines in Circle (CRCL) and Coinbase (COIN) stocks, plunging by roughly 20% and 10%, respectively. The decline in stock price stems from the anticipation that the legislation would ban or heavily restrict passive interest payments on stablecoin holdings, affecting the key revenue model for USDC’s issuer (Circle) and its partner (Coinbase).
The Clarity Act aims to treat stablecoin rewards differently from traditional bank deposits. The act will provide a “narrow” definition of allowed activities, such as interest payments and yield taking for holders. The stocks have seen a dip in anticipation that removing the interest-earning potential will make USDC less attractive for investors.
Clarity Act: An Existential Threat to USDC
The proposed Clarity Act will probably undermine the very existence of the USDC. Currently, USDC holders are getting an Annual Percentage Yield (APY) of 3.5%–4% for merely holding the currency. This incentive will disappear with the implementation of the act. This will result in USDC being driven by utility rather than yields, making it a less attractive investment.
Large treasury managers are currently using USDC to optimize liquidity, reduce settlement times, and generate yield on a 24/7 basis. Once the act is implemented, USDC will stop giving competitive returns, as the CLARITY Act could ban passive interest on stablecoins, potentially driving capital back into money market funds (MMFs). Such a situation will threaten Circle’s revenue model.
As far as Circle is concerned, nearly 95% of its revenue comes from reserved interests. A shrinking value for USDC, which comes with the implementation of the Clarity Act, will undermine Circle’s position unless it redefines its priorities and launches new spend-to-earn programs to maintain its investor base intact.
Coinbase, being Circle’s partner, will also be affected, but the impact on Coinbase will be less. This is because their revenue is more diversified with other sources such as trading fees, Base network sequencers. This explains why their stock “only” fell 10% compared to Circle’s 20%.
How will Tether Take Advantage of the Situation?
Tether, a stablecoin that falls out of the purview of US legislation, is expected to be the beneficiary of the Clarity Act, as investors will abandon USDC and start moving to this stablecoin. This “offshore flight” of capital to non-compliant stablecoins will largely affect the prospects of Circle and Coinbase. U.S. investors may flee the domestic regulatory umbrella in search of returns, potentially hollowing out the U.S. crypto economy. While the vacuum created by the Clarity Act will be absorbed by Tether, on the flip side, for U.S. pension funds and insurance companies, USDC could emerge as the only “legally safe” stablecoin, trading its high-yield appeal for the unmatched status of a compliant, institutional-grade payment rail.
