Why did Circle, a stablecoin not allowed to "pay interest," plummet by 20%?

US stablecoin regulation is shifting from "boundary delineation" to "structural constraints."

In the newly disclosed draft amendments to the Clarity Act, a seemingly technical clause has triggered a rapid pricing adjustment in the capital markets:Prohibits users from earning returns solely for holding stablecoins and restricts any arrangements that are economically equivalent to deposit interest. As a result, Circle (CRCL), the issuer of the USD stablecoin USDC, fell by about 20% at one point during the day, and Coinbase (COIN) also came under pressure. If this is simply interpreted as "tightening regulation," it's easy to underestimate the actual meaning of this clause. More accurately, this is a "targeted constraint" on the core mechanism of the stablecoin business model.

“Yield Penetration” Model Restricted

Stablecoins have long been in a relatively ambiguous regulatory space: on the one hand, they are not recognized as bank deposits; on the other hand, their funding structure is highly similar to “deposit-like liabilities”.

Circle Under Pressure

For companies like Circle that heavily rely on interest income from reserve assets, this constraint directly targets the core of their revenue structure.

“Scale-driven logic” weakened

The growth of stablecoins is usually driven by two types of demand:

• PayFi Strategic Blueprint

  It is worth noting that Circle's business layout has already demonstrated a forward-looking response to the aforementioned changes to some extent.Circle is committed to building a "Web3 PayFi network", and its strategic goal is to compete with traditional payment giant Stripe, attempting to reduce its reliance on the revenue from a single reserve through diversified services ...>

  PayFi Strategic Blueprint

  It is worth noting that Circle's business layout has already demonstrated a forward-looking response to the aforementioned changes to some extent.Circle is committed to building a "Web3 PayFi network", and its strategic goal is to compete with traditional payment giant Stripe, attempting to reduce its reliance on the revenue from a single reserve through diversified services.

  Its current strategy can be summarized in three levels: 1. Infrastructure: Arc. As the underlying network for on-chain asset issuance and circulation, Arc has processed over 1.6... 1. Billions of transactions, handling cross-chain and liquidity distribution functions. 2. Payment Network: CPN (Circle Payments Network) Annualized transaction volume of approximately $5.7 billion, with over 50 financial institutions connected, attempting to build a settlement system similar to traditional payment networks.

  3. Application Layer (including AI Payment and Micro-payment)

  Through products such as Nanopayments, support high-frequency transactions of extremely low amounts (as low as one millionth of a dollar), providing infrastructure for automated payment scenarios (such as AI Agents). In addition, Circle leverages its strong corporate partnership network to collaborate with industry giants such as Visa, Intuit, Polymarket, JPMorgan Chase, and Mastercard to jointly launch products utilizing USDC and continuously expand its application scenarios. These strategic initiatives demonstrate that Circle is not content with being merely a "stablecoin issuer," but is committed to becoming the "Stripe" of the Web3 world, generating revenue from diversified sources such as transactions themselves, payment services, and developer tools by building underlying payment infrastructure. From a policy perspective, the direction of the Clarity Act is not complicated: to remove stablecoins from the category of "deposit-like instruments" to prevent them from substituting for the funding sources of the banking system, while retaining their function as payment and settlement tools. In other words, regulation is not negating stablecoins, but rather reshaping their functional boundaries. Under this framework, the industry may diverge: The model relying on interest rate spreads and capital accumulation will face continuous compression. Models relying on transactions, clearing, and network effects possess stronger sustainability. If the restrictions of the Clarity Act are ultimately implemented, their impact will extend beyond short-term market fluctuations; it will be a systemic reshaping of the stablecoin business model. For Circle, this represents both a direct compression of its existing interest rate spread model and a passive path shift. Once "profitability" is constrained, what truly determines its long-term value will no longer be the interest rate, but rather: its ability to become the infrastructure for global capital flows.