Circle’s share sell-off on Tuesday may have been overdone, analysts at Bernstein said, arguing investors overlooked that the stablecoin issuer’s core business model is largely unaffected by the proposed CLARITY Act.
In a client note, Bernstein analysts Gautam Chhugani, Mahika Sapra, Sanskar Chindalia and Harsh Misra said markets are conflating “who earns yield” with “who distributes yield.” “Circle earns. Coinbase distributes,” they wrote, noting the draft legislation primarily targets the distribution of yield to users rather than the reserve income earned by issuers such as Circle.
The latest CLARITY Act draft would prohibit platforms from offering yield on passive stablecoin balances or products deemed “economically equivalent” to interest, while leaving room for activity-based rewards tied to user engagement — for example, trading or payments. Bernstein said these stablecoin reward carve-outs could still allow distribution of rewards linked to user activity tiering, and that the market’s knee-jerk reaction may not be calibrated.
Circle’s business model depends on income from reserves backing USDC, which are primarily invested in short-term U.S. Treasurys. Bernstein estimates that reserve income reached about $2.6 billion in 2025. The analysts reiterated that this reserve income is distinct from third-party platforms distributing yield to users.
Circle shares fell roughly 20% on Tuesday after the legislative update, despite having gained more than 160% from February lows. By midday Wednesday, CRCL had recovered some losses, trading up about 3.5%. Circle stock remained up roughly 30% year-to-date.
Bernstein reiterated a bullish outlook on Circle earlier in March, maintaining an “Outperform” rating with a $190 price target — nearly double then-current levels. The firm highlighted robust momentum in USDC: circulating supply has expanded to about $80 billion from roughly $30 billion over the past two years, driven by demand for trading, collateral, payments and global dollar access. Bernstein also pointed to rising on-chain transaction volumes as evidence of USDC’s growing role across crypto markets and cross-border finance; USDC’s transaction volume approached $12 trillion in Q4 2025.
USDC is currently the second-largest U.S. dollar-denominated stablecoin, behind Tether’s USDT.
