A new legislative proposal in the United States, known as the CLARITY Act, is causing ripples across the cryptocurrency market, with stablecoin companies particularly feeling the impact. The bill, which addresses the interest generated by stable digital assets, triggered a notable decline in shares of Circle—the firm behind the USDC stablecoin. Shares of leading cryptocurrency exchange Coinbase also slipped sharply following the news. However, market experts caution that the long-term effects of the bill may vary significantly depending on the institution.
How Do Circle and Coinbase Share Revenues?
Circle, a U.S.-based issuer of the USDC stablecoin, operates within the global financial technology landscape. Coinbase, ranking among the largest U.S. crypto exchanges, maintains a strategic partnership with Circle focused on distributing USDC. Under their existing business arrangement, a substantial portion of the interest earned from users holding USDC on Coinbase’s platform is funneled directly to Coinbase. For USDC assets held outside Coinbase, the interest income is split roughly equally between the two companies. According to Markus Thielen, founder of the research firm 10x Research, this model brings Coinbase over $900 million in annual revenue—making up nearly half of Circle’s total earnings.
This structure has allowed Coinbase to make significant profits from stablecoin-based revenue streams. Yet if the CLARITY Act results in a ban on interest-like rewards for stablecoins such as USDC, one of Coinbase’s primary income sources could be threatened. Thielen adds that in an environment where regulatory compliance and balance sheet strength become more crucial, Circle might be best positioned to capitalize within the evolving global regulatory framework.
Experts Reassess Regulatory and Market Impact
While both Circle and Coinbase experienced some recovery after an initial sell-off spurred by the CLARITY Act, their shares ended the week with clear losses. Nonetheless, some industry analysts suggest that, in the long haul, the new legislation could actually accelerate Circle’s growth.
Matt Hougan, Chief Investment Officer at Bitwise, argues that concerns over the bill’s impact on Circle may be overstated. In his view, earning interest isn’t the main driver for stablecoin adoption. Instead, he points out, stablecoins are primarily favored for their ease of moving dollars and for enabling access to blockchain-based financial services. Hougan notes that many stablecoins don’t offer interest returns yet still see rapid uptake.
According to Hougan, restrictions introduced by the bill might reduce the income Circle shares with its partners. However, this adjustment could ultimately improve the company’s profit margins over time.
Hougan points to forecasts that predict the stablecoin market will reach trillions of dollars within the next decade. If Circle emerges as a leading player within a clearer regulatory landscape, it stands to benefit significantly from this expansion.
Given these regulatory shifts, many in the industry believe that the commercial contract negotiations scheduled between Circle and Coinbase in 2026 could fundamentally reshape the competitive balance. Should federal regulations become more stringent, Circle is expected to secure more favorable terms in future agreements.
