Key Points:

Circle drops 20% as stablecoin reward rules tighten

CLARITY Act debate centers on the yield and regulation balance

Analysts say sell-off overblown, see $75 billion upside by 2030

Shares of Circle took a sharp hit this week, dropping nearly 20% on March 24.

This came after reports that new crypto legislation could restrict incentives tied to holding its USDC stablecoin.

The proposal would reportedly prohibit offering yield “directly or indirectly” on stablecoin holdings if it resembles interest-bearing accounts.

It also bars incentives considered economically equivalent to interest, applies rules across exchanges and brokers, allows only limited activity-based rewards, and directs regulators like the U.S. Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Treasury to define the framework within a year.

However, some analysts point out that there is more to the picture.

Related: Cathie Wood buys $16M in Circle as stock crashes

At the center of the debate is the CLARITY Act, a proposed bill aimed at defining how digital assets, particularly stablecoins, are regulated in the United States.

The legislation seeks to clarify oversight between the SEC and CFTC while addressing how stablecoins function within the broader financial system. The biggest sticking point is stablecoin rewards.

Supporters like Brian Armstrong argue that rewards are essential for innovation.

“I think Americans should be able to earn more money on their money. Banks should have to compete on a level playing field,” Armstrong said, pushing back against restrictions.

But critics, especially from traditional banking, warn that yield-bearing stablecoins could start to resemble bank deposits, raising systemic risks.

Analysts at Standard Chartered have warned that widespread adoption of stablecoins could pull close to $1 trillion in deposits away from traditional banks in developing countries over the next few years.

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Despite the sharp drop, some analysts are urging caution before writing off Circle’s long-term prospects.

Bitwise CIO Matt Hougan called the reaction “overblown,” pointing out that interest-bearing incentives have not historically driven stablecoin growth. Most stablecoins, including USDC, are widely used without offering direct yield.

He also highlighted projections that the stablecoin market could reach nearly $2 trillion by 2030, a massive expansion opportunity.

Importantly, while incentives may face restrictions, Circle still benefits from an early-mover advantage in the stablecoin market, strong partnerships, including with Coinbase, and growing demand for digital dollar infrastructure.

Hougan even suggested Circle could reach a $75 billion valuation by 2030, despite near-term regulatory uncertainty.

In a separate commentary during the Milk Road podcast, Hougan added that Circle doesn't need to focus on diversifying to maintain its standing in the stablecoin market.

"Maybe focus on growing that [stablecoin]. I think they have a good chance just on that alone. Now they have to do things to protect that take rate. So the work they are doing on their own blockchain and on integrating with payments...I think it’s important because it protects that take rate from the trillion dollars in assets that I think they might have in a few years."

A take rate is the percentage of money a company earns from transactions on its platform. For example, if $100 flows through a platform and the company earns $2 from it, the take rate is 2%.

Crypto companies like Circle or Coinbase generate take rates through fees, spreads or interest income. It’s an important metric because it shows how much profit a company makes for every dollar moving through its system. The higher the take rate, the more revenue it generates.

As of March 25, Circle’s stock has already shown signs of recovery. Its shares rebounded about 3.26% at press time to $104.44.

Related: Analyst says Circle’s ‘risk-free’ stock is better than MicroStrategy

This story was originally published by TheStreet on Mar 25, 2026, where it first appeared in the Trading News & Analysis section. Add TheStreet as a Preferred Source by clicking here.