Author: Mario Stefanidis, Research Director of Artemis Analytics; Source: Artemis; Compiler: Shaw Golden Finance

CRCL plunged 20% on Tuesday (U.S. local time), the largest intraday drop since its listing, and US$5 billion in market value was wiped out in a single day. Volume hit 56.4 million shares, nearly 4 times its 90-day average. Coinbase fell 11% in the aftermath.

The entire stablecoin sector suffered a revaluation within hours. The trigger was a new draft of the CLARITY Act, which would essentially kill passive income from stablecoins.

However, the impact of the incident goes far beyond a single-day plunge. A regulatory game, the fragility of the business model itself, and a wallet freeze incident made the already falling stock price even worse.

CLARITY Act bombshell

On March 20, Senators Thom Tillis (Republican of North Carolina) and Angela Alsobrooks (Demary of Maryland) announced that they had reached an agreement in principle on the issue of stablecoin revenue with the support of the White House. The full text of the bill was reviewed by crypto industry leaders in a closed-door meeting on Capitol Hill on Monday.

Core Terms:Passive gains from stablecoins derived solely from holding USD-pegged tokens are prohibited. Exchanges, brokers, and their affiliates may not directly or indirectly provide revenue on stablecoin balances, nor may they provide revenue in any manner that is "economically equivalent to interest."

Activity-based rewards tied to payments, transfers or platform usage will still be allowed. The U.S. Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and the Treasury Department will work together within a year to define the scope of compliance awards and anti-circumvention rules. It is worth noting that the SEC and CFTC recently signed a landmark inter-agency memorandum, ending years of infighting and disagreement between the two parties.

In writing, Congress drew the line that the banking lobby has been insisting on for two years: Stablecoins can be used as payment instruments, but they must not be deposit substitutes.

According to an internal stakeholder email obtained by reporter Eleanor Terrett, an industry leader who participated in the closed-door meeting said that the text of the bill is "contrary to" previous communications with the White House. The person warned that the "economic equivalence" standard is intentionally vague and may be interpreted very strictly by regulators in the future.

The impact on Circle is far greater than any other organization

Circle currently generates 95.5% of its revenue from interest income generated from USDC reserves, which explains the sell-off.

Circle issues USDC, invests its reserves in short-term Treasury bonds and overnight repurchase agreements, and earns interest differentials. In the fourth quarter of 2025, its reserve income reached $711 million, a year-on-year increase of 60%, mainly due to a 97% increase in the average USDC circulating supply. Full-year revenue for fiscal 2025 was $2.7 billion, up 64% year-over-year.

The CLARITY Act does not directly hit Circle's reserve income (Circle itself earns this part of the income), but directly hits its demand growth engine. Currently, platforms such as Coinbase will transfer stablecoin earnings to users as an incentive to hold USDC. Coinbase’s stablecoin-related revenue will reach $1.35 billion in 2025, up from $910 million in 2024. If exchanges can no longer provide income for USDC balances, the incentive for users to hold USDC instead of traditional bank deposits will be significantly reduced.

The decrease in revenue pointsinto means that the adoption rate of USDC decreases, which in turn leads to a shrinking of the size of the reserve fund, and ultimately Circle’s interest income will also decrease.

The timing is even worse. As the Fed cuts interest rates, the reserve yield has fallen from 4.49% in the fourth quarter of 2024 to 3.81% in the fourth quarter of 2025. While markets are now no longer pricing in a rate cut this year, Circle's interest income was already under pressure even before the bill was introduced.

USDC fundamentals have never been stronger

On the same day that the stock price plummeted, USDC’s core indicators were at all-time highs:

• Float: $81 billion as of late March, up from $76 billion at the end of 2025;

• On-chain transaction volume: In the fourth quarter of 2025 alone, it reached US$6.8 trillion (adjusted), a year-on-year increase of more than 2 times;

• Market share relative to USDT: Since August 2025, USDC trading volume has surpassed USDT every month, and currently accounts for more than 80% in 2026;

• Fourth quarter results beat expectations: Revenue of $770 million, compared with expectations of $745 million; earnings per share of $0.43, beating consensus estimates by 23%.

Circle also announced its entry into the African market through a partnership with Sasai Fintech and completed a major integration with Intuit.

The wallet freezing incident adds fuel to the fire

Circle froze the USDC balances of 16 corporate hot wallets on Monday night, causing business interruptions for multiple exchanges, casinos and foreign exchange platforms, including FxPro, Pepperstone, AMarkets and HeroFX.

It is reported that the freeze stems from a US civil case, and the specific details have not been disclosed. On-chain analyst @zachxbt sharply questioned this, noting that anyone with basic on-chain analysis tools would be able to identify these as operational commercial wallets processing thousands of transactions. He warned that an opaque freeze based on undisclosed civil litigation could turn USDC into a “politicized access control tool.”

In USDC’s smart contract code, the permissions to control and even clear frozen address assets have been clearly written into the blacklist. On a day when the market is already doubtful about the risks of centralized stablecoins, this incident feels extremely bad.

The bullish logic still exists

The current sell-off has priced in the most pessimistic expectations of the CLARITY Act into stock prices. From an optimistic perspective, there are still a few points worthy of attention:

Event-based rewards are not affected. The bill clearly distinguishes between passive income (prohibited) and transaction-based incentives (allowed). Platforms such as Coinbase are already working on solutions: marketing incentives, behavior-based payments, issuer cooperation, etc. to blur the line between interest and rewards. There is room for ambiguity in the "economic equivalence" standard itself, which means that there will be a lot of legal games in the future.

Coinbase’s profits and losses may not change much. Coinbase basically just transfers stablecoin earnings to users, so the related revenue is usually offset by expenses. Analysts believe the direct impact on its earnings will be limited. The bigger question is whether the restrictions will slow down USDC’s long-term adoption.

The bill has not yet officiallycome into effect. Committee deliberations are not expected to take place until late April, after the Easter recess. Industry still has time to lobby, submit amendments and negotiate. Although Coinbase CEO Brian Armstrong has not publicly commented on the latest draft, his past position shows that Coinbase will vigorously fight against the "economic equivalence" clause.

Non-reserve business revenue grew rapidly. Platform services, transaction processing and other non-reserve-related revenue increased more than 15 times year-over-year in the fourth quarter to $37 million, and other revenue for the full year reached $110 million. Although the scale is still small compared to interest income, the logic of income diversification is beginning to emerge.

Following situation

Prior to this rout, CRCL shares were up 170% from their February lows. Driven by positive earnings reports, USDC trading volume surpassing USDT, and cooperation with Intuit, the stock price rose from $50 to $127. However, the previous valuation has fully factored in the perfect development expectations of interest income, AI-driven payment and asset tokenization business, leaving no buffer space for negative regulatory effects.

With shares currently trading around $101, CRCL trades at about 9 times annualized revenue. The current core debate in the market is: Will the CLARITY Act kill USDC’s growth flywheel or force its transformation and evolution? If stablecoin popularity continues to grow, driven by payments, cross-border settlement, and institutional demand (and on-chain data remains positive), Circle's reserve revenue engine will continue to operate even if Coinbase is unable to provide revenue for idle balances.