Stablecoin issuer Circle's stock plummeted after a new version of the proposed &#34;Clarity Act&#34; suggested potential restrictions on yields for stablecoin balances.
Circle's stock price fell as much as 19%, marking its largest single-day drop on record. The previous record drop occurred on June 27, when it fell 15.5%. This move also weighed on Coinbase, the primary distribution platform for USDC, whose shares dropped by as much as 9%.
For stablecoins like Circle's USDC, earning yield (often in the form of rewards) is a key incentive for users to hold these assets, similar to interest earned on cash in a bank account. The latest draft of the bill would prohibit stablecoin issuers from paying yields to users simply for holding the assets. However, the bill may still permit &#34;activity-based rewards,&#34; such as using stablecoins for payments, trading, or lending.
The issue of stablecoin interest has become an increasingly prominent point of contention in the crypto industry. Banks argue that if crypto apps like Coinbase offer interest, customers may move funds out of the banking system.
Meanwhile, Circle's rival Tether announced that it has hired an unnamed &#34;Big Four&#34; accounting firm to conduct the first audit of its USDT reserves.
According to data from CryptoQuant, USDT is currently the largest stablecoin by market capitalization, with a size of $184 billion. However, it has been mired in controversy for years: despite Tether's promises to increase transparency through quarterly &#34;attestation reports,&#34; it has never provided a full, formal audit report. This has led many investors and regulators to worry that its reserves are not transparent enough or may not meet auditing standards.
Circle's popularity surged after successfully completing its IPO last year, and its USDC is generally considered to be more institutional-grade than Tether. It undergoes a comprehensive annual audit by Deloitte and publishes monthly attestation reports. Currently, USDC is the second-largest stablecoin, with a market capitalization of approximately $78.6 billion.

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Stablecoin issuer Circle's stock plummeted as a new version of the proposed "Clarity Act" suggests potential limits on stablecoin balance yields. Circle's plunge also dragged down Coinbase. On the same day, rival Tether announced it has hired an unnamed "Big Four" accounting firm to conduct its first-ever audit of USDT reserves

- Circle's stock plummeted 19% following concerns over the "Clarity Act," which may restrict earnings on stablecoin balances.  
- This decline impacted Coinbase, which saw a 9% drop, as Circle's USDC provides significant user incentives through earnings similar to bank interest.  
- The bill's draft could prohibit stablecoin issuers from paying returns solely for asset holding, raising concerns in the crypto industry over competition with banks, while Tether faces scrutiny over its USDT reserves amidst calls for transparency.

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Proposed Bill May Limit Stablecoin Yields; Circle Skids Nearly 20% in Record Daily Drop