Revised stablecoin legislation sparks rally for Circle and Coinbase as Clarity Act hurdle cleared
The legislative shift, which permits rewards for active transactions while banning payouts on dormant funds, removes a primary obstacle to the Clarity Act and sends investors rushing to buy.
Shares of Circle Internet Group and Coinbase Global surged on Monday following the release of revised stablecoin legislation by US lawmakers. Circle Internet Group shares climbed 15 per cent, while Coinbase Global shares rose 5 per cent, as investors welcomed the development. The new text addresses the long-standing debate over yield payments, a contentious issue that has stalled the passage of the Clarity Act since the beginning of the year.
The revised legislative text bars crypto platforms from paying yield on idle stablecoin balances. However, it permits rewards for coins used in bona fide transactions, liquidity and market-making activities, and collateral posting tied to trades or loans. This change resolves the primary obstacle preventing the Clarity Act from advancing, a bill that has been held up by concerns over interest payouts from dormant balances. Coinbase and Circle share a long-term commercial distribution agreement for USDC, the world's second-largest stablecoin, and have historically relied on interest payouts from idle balances as a key growth driver.
TD Cowen analyst Jaret Seiberg suggests the outcome could incentivise daily stablecoin usage, potentially disintermediating banks from consumer finance. For the same reason, Seiberg is not yet convinced the revised rule will ultimately be enacted, noting that banks remain a significant hurdle to the bill's passage. It remains unclear if the specific language regarding transaction rewards will be sufficient to overcome banking opposition in the coming weeks.
The legislation is currently being reviewed by the Senate Banking Committee, which faces a tight timeline due to upcoming holidays. Seiberg estimates a late July deadline for Senate passage, meaning the committee only has a few weeks left to push the bill to the floor. The Senate Banking Committee is expected to schedule a markup hearing for the Clarity Act in the coming days to address these remaining matters.
The debate over stablecoin yield payments has dominated the regulatory landscape for the crypto industry, with the outcome of this legislative shift having immediate implications for market structure. While the revised rules offer a clearer path forward, the final enactment depends on whether the Senate can navigate the remaining opposition from traditional financial institutions before the summer session concludes.
