A new iteration of the CLARITY Act pressured shares of Circle (CRCL) and Coinbase (COIN) this week, though analysts say the market may be overlooking how the proposed regulation could alter the competitive landscape in the longer run.
Circle was hit hardest in Tuesday’s selloff after revised provisions targeting stablecoin yield came into focus. While both stocks staged a mild recovery on Wednesday, they remain significantly below pre-announcement levels.
Markus Thielen, founder of 10x Research, believes the current draft of the bill could ultimately tilt the balance in Circle’s favor. In his view, the regulatory changes are more likely to undermine Coinbase’s distribution-based earnings model than Circle’s position as a stablecoin issuer.
Under their existing partnership, Coinbase captures a substantial share of USDC-related revenue. The exchange collects nearly all interest income on balances held on its platform, while off-platform earnings are generally split evenly. Thielen estimates Circle pays Coinbase over $900 million annually—around half of its total revenue.
This structure has made stablecoin income a high-margin contributor for Coinbase. However, potential limits on yield-like incentives could weaken that advantage.
Thielen argues that a more defined federal framework would favor issuers with strong compliance, scale, and balance sheet strength—areas where Circle is well positioned. He also highlights the companies’ next commercial renegotiation in August 2026 as a key moment, suggesting Circle could gain leverage to secure more favorable terms.
Meanwhile, Bitwise CIO Matt Hougan sees the recent decline in Circle’s stock as overdone, maintaining that the CLARITY Act does not materially impact the long-term investment case.
Hougan emphasizes that yield has not been the primary driver of stablecoin growth. Instead, adoption has been fueled by their role in enabling efficient cross-border payments, facilitating trading, and providing access to blockchain-based financial infrastructure. As such, restrictions on yield are unlikely to significantly affect demand.
He also points to projections that estimate the stablecoin market could expand to between $1.9 trillion and $4 trillion by the end of the decade. As a leading regulated issuer, Circle stands to benefit if activity continues to migrate toward compliant, onshore platforms.
Additionally, Hougan notes that tighter regulation on yield passthrough could allow Circle to retain more revenue rather than sharing it with partners like Coinbase, potentially improving profitability over time.
Taken together, he sees a path for Circle to reach a valuation of roughly $75 billion—about double its current level.
“If stablecoins evolve as expected,” Hougan said, “even conservative assumptions suggest Circle remains an attractive opportunity.”
