CLARITY Act Yield Compromise Strengthens Circle's Position, Says Bernstein

Research firm Bernstein has argued that a yield-related compromise embedded in the US CLARITY Act structurally benefits Circle Internet Group, as the provision effectively forecloses yield-based competition while preserving the distribution and incentive structures underpinning USDC's growth.

The CLARITY Act cleared a 15-9 committee markup vote on May 14 with bipartisan support. The bill prohibits stablecoin issuers from offering interest that is economically or functionally equivalent to a bank deposit on passive balances, while allowing rewards tied to activities such as trading, payments, and other usage-driven incentives.

Circle does not directly offer passive yield on USDC balances. Partners such as Coinbase instead use distribution arrangements and activity-based rewards programs. Bernstein analysts, led by Gautam Chhugani, read the compromise language as protecting those structures and closing off a scenario where less-liquid issuers could gain market share purely by outbidding on rates.

Bernstein carries an Outperform rating and a $190 price target on Circle, which closed at $114 on May 15, implying roughly 67% upside from current levels. Coinbase also received an Outperform rating with a $330 price target against a $195.43 close.

Total dollar-backed stablecoin supply reached a record above $300 billion as of Monday, with Tether's $USDT holding the largest share and USDC in second place. The two together account for about 97% of the supply. Adjusted stablecoin transaction volumes are running at approximately $15 trillion per month based on April data, putting annualized volumes on track for $100 trillion, double the $55 trillion recorded in 2025. USDC's share of adjusted volumes climbed from 41% to 60% year-over-year, driven by gains in spot trading and wallet-to-wallet transfers.

Circle's ARC blockchain, built for institutional payments and integrated with its agentic stack, has logged 244 million cumulative testnet transactions since its October 2025 launch, with 1.6 million unique wallets transacting in Q1. The ARC token presale raised $222 million at a $3 billion fully diluted network value from investors including a16z crypto, Apollo Funds, Ark Invest, and BlackRock. ARC uses USDC as its native gas token and features what Bernstein described as quantum-ready architecture.

Three legislative stages remain before the CLARITY Act becomes law: the Senate Banking Committee version must be merged with the Senate Agriculture Committee bill; the combined text requires 60 Senate floor votes; and the House, which passed its own version in July 2025, must reconcile its text with whatever the Senate produces. Polymarket currently puts the odds of passage in 2026 at 62%. Coinbase CLO Paul Grewal has said he expects the bill to pass this summer, while GSR's chief legal and strategy officer has put the odds at below 50%.