Regulatory disputes surrounding the profit mechanism of stablecoins have triggered significant market volatility. Affected by the latest progress of the crypto market structure bill proposed by the U.S. Congress, several crypto-related stocks fell sharply on Tuesday, as investors expressed concerns over the potential impact on stablecoin business models. Among them, stablecoin issuer Circle (CRCL) saw its stock price plummet by over 20%, with its issued USDC being the second-largest stablecoin globally; its partner Coinbase (COIN) also saw its stock price decline by more than 9.7%.
Reports indicate that the Digital Asset Market Clarity Act, currently advancing in the U.S. Senate, may include a key provision that prohibits platforms from paying yields to stablecoin holders in a manner akin to bank deposit interest. A draft email obtained by industry group the Blockchain Association shows that the provision would bar companies from paying interest “directly or indirectly” to users solely for holding stablecoins, while allowing reward mechanisms tied to genuine business activities, such as loyalty, promotional, or subscription-based incentives. The market widely fears that if such yields are banned, it could weaken users’ incentive to hold stablecoins, thereby limiting the growth potential of products like USDC.
In the current stablecoin model, issuers typically invest reserve funds in low-risk assets such as U.S. Treasury bonds and reverse repurchase agreements, sharing the proceeds with distribution platforms. Some platforms also offer holders yields to attract funds; for example, Coinbase currently offers an annual percentage yield of approximately 3.5% to USDC holders. This model has also become a major source of concern for traditional banks, with banking industry groups arguing that such products could divert deposits, thereby undermining the lending capacity of the banking system.
The current controversy over the bill reflects the ongoing struggle between the crypto industry and the banking sector. Although the industry has long pushed for legislation to clarify the regulatory framework for crypto assets and escape the uncertainties of securities laws, significant disagreements persist over whether stablecoins should possess deposit-like characteristics. It is reported that the White House and several senators reached a preliminary compromise on the issue last week and have begun consulting with banks and crypto companies on specific provisions. The draft also suggests that the U.S. Treasury Department, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) should formulate more detailed rules to define under what circumstances yield payments would be permitted.
However, significant uncertainty remains over whether the bill will ultimately pass. Analysts point out that if the legislation is delayed or fails, the crypto industry may once again face a more stringent regulatory environment in the future.
Previously, Circle announced its first partnership in Africa with a division of Cassava Technologies, a company backed by Nvidia. Sasai Fintech Ltd., a subsidiary of Cassava, operates a remittance application across 30 markets on the African continent, allowing its customers to use the USDC stablecoin for domestic and cross-border payments. The founder of Cassava stated that Africa’s digital economy is entering a new era, and integrating USDC will unlock more business opportunities and promote financial inclusion.
Africa is increasingly turning to stablecoins to facilitate cross-border business and reduce remittance costs. These dollar-pegged units also offer a hedge against local currency devaluation and dollar shortages. The co-founder of Circle noted that emerging markets are at the forefront of stablecoin adoption, and this partnership represents a significant opportunity to expand USDC into high-growth payment corridors.
