CLARITY Act Draft Leaks, Circle Stock Crashes 20% and Loses $5.6 Billion Overnight

Shares of Circle Internet Group Stock (CRCL), the issuer of USDC, dropped nearly 20%, closing at $101.17 from $126.64. The fall wiped out $5.6 billion in market value. Coinbase shares also fell 11% on the news. The decline was allegedly linked to a leaked CLARITY Act Draft, which hinted at banning passive rewards on stablecoin holdings. 

As reported by Eleanor Terrett, this draft would prevent interest-like returns on stablecoins while still allowing activity-based incentives such as staking, loyalty programs, or liquidity provision. 

Regulators, including the SEC, CFTC, and Treasury, would have up to a year to define allowable reward structures and anti-evasion rules.

She also described the draft as narrower than the original proposal, keeping transaction-based rewards but leaving room for future interpretation by regulators.

Why the Drop Happened

The revised CLARITY Act, led by Senators Thom Tillis and Angela Alsobrooks, bans any yield “directly or indirectly” and targets anything “economically or functionally equivalent” to interest. Circle earns 96% of its revenue from interest on USDC reserves, so the legislation threatens its main income source. 

An X user noted that the drop is driven by legislative risk, not ARK Invest sales or broader market fears. For the unversed, Cathie Wood sold $5.9 million of CRCL on March 20, four days before the draft leaked. However, despite this, experts claim the real trigger was the stablecoin yield ban, not the ARK sale.

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Banks See Potential

Coinbase CEO Brian Armstrong pointed out that banks are using stablecoins for faster payments, asset tokenization, and crypto trading. However, limiting yields could slow USDC’s growth, making it harder for stablecoins to move from payment tools to true store-of-value assets. 

What’s Next

Bank representatives are set to review the draft soon, with final legislative markup expected in late April. If the US Stablecoin Bill keeps the yield ban, Circle’s revenue could be immediately affected. Regulators will have one year to define allowable rewards and anti-evasion rules, shaping how stablecoin incentives work across the U.S.

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