Following rumours that new U.S. legislation would restrict how businesses pay rewards on stablecoins, Circle Internet Group’s shares plummeted by about 20%.
The stock fell from its opening price of almost $127 to almost $101, even hitting an intraday low of $98. Reports regarding the draft CLARITY Act, which may forbid platforms from providing yield or interest-type benefits on stablecoins like USDC, caused this abrupt decline.
Early information indicates that both direct and indirect payments that resemble bank interest would be prohibited by the proposed rule. Exchanges, brokers, and other cryptocurrency service providers who offer yield-based products may be impacted by this.
As long as they are not regarded as deposit interest, the draft does permit some activity-based rewards, such as promotions or transaction-linked incentives. Regulators like the CFTC and SEC will probably make the final definitions.
With robust reserve income and increasing circulation, Circle’s business strategy is directly linked to the expansion of USDC. Because of this, it is extremely vulnerable to changes in regulations.
The market response demonstrates how fast investors react to policy risks, even though the law is not yet implemented. These regulations could change how stablecoins compete with conventional banking products if they are brought into force.
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