The new bill discussed in the US Congress has brought the limitation of reward practices for stablecoins to the agenda. Circle shares in particular suffered a significant loss following the new draft that would ban returns to passive stablecoin balances. The drop in share price has raised concerns among investors about the possible effects of the bill on the company’s revenue model.
Circle rating in Citi and Bernstein reports
Circle operates as a US-based technology company that issues USD Coin (USDC) and develops digital asset infrastructure. In the report published by Wall Street bank Citi, it was stated that the legal regulation does not pose a definite threat, but may cause a short-term growth obstacle for Circle. The report states that the bill only restricts reward programs that are similar to banking deposits; It was emphasized that rewards based on activities such as transactions or payments are possible.
Circle already transfers the bulk of its reserve revenues to its partners, specifically Coinbase, so a blanket third-party rewards ban would not directly impact the company’s net income, Citi analysts said. It was also emphasized that USDC is not an investment tool but rather a payment solution; It was stated that the weakening of return incentives may reduce circulation and liquidity in the short term.
In the assessment of Wall Street brokerage firm Bernstein, it was stated that the market misinterpreted the bill. In particular, it was pointed out that there is confusion between who provides the return sharing and who distributes it. Circle generates revenue from reserve assets and does not pay returns directly to the user; Platforms such as Coinbase perform this application.
Market reactions, competition and regulatory pressure
Circle shares lost approximately 20 percent of their value after the draft law emerged. While the target price set by Citi for Circle shares was $243, the stock was traded around $100 on the relevant day. Bernstein announced that he continues to rate Circle positively and set a target price of $190.
The uncertainty created by the developments regarding the bill affected investors’ perspective on the crypto market and especially stablecoin issuers. In addition, Tether’s announcement that it plans to receive a full-scale audit from a large auditing firm and signaling growth in the US market has increased competition in the stablecoin field.
Circle’s income model is based on a structure that does not offer returns in its current form, and it was stated that the company made a profit of $2.64 billion from reserve income during the year. It is reported that the regulatory pressures that negatively affect Circle shares do not pose a permanent threat because the company does not provide returns directly to the user.
On the other hand, Coinbase has a cautious attitude in the negotiations on the Clarity Act. The company, which privately conveyed to Senate officials that they were dissatisfied with the current format, has not yet made a public statement of opposition.
