Circle shares fell on Tuesday (almost 20%) after US lawmakers introduced the Clarity Act. This decline has been linked to the Clarity Act bill, which suggests it would limit the interest paid on cryptocurrency holdings.

A key misunderstanding about the basics of cryptography

The reason for the sudden decline? The market doesn’t understand the regulations, said analyst Gautam Chhugani and three of his Bernstein colleagues investor note made available to DL News. “The market compares who earns with who distributes the crops,” they said.

It is no secret that the market is moved by the increased emotional reactions of investors reacting to real events, such as a geopolitical crisis or a change in legislation that may affect their positions. However, investors would do well to go back to basics and revisit the underlying mechanics before they panic over the Transparency Act. A stablecoin issuer and a stablecoin distributor are not the same: a stablecoin issuer is an entity that creates a token and manages the reserves associated with it, while a stablecoin distributor is a platform or intermediary that distributes the token to users and often holds their balances. Circle is the company that issues USDC, not the one that distributes it: that’s what platforms like Coinbase do.

Today's chart shows Circle shares slightly recovered after briefly dropping under $100 on Tuesday. Source: TradingView

The language of the Clarity Act mandates oversight of how crypto tokens are circulated and distributed, not the entities that create or issue them. This means that lawmakers are focusing on activities related to moving stablecoins to end users, such as the platforms offering them, the marketing profits of intermediaries, and programs that pay interest on the balance, rather than directly imposing modern rules on the companies that mint tokens and manage reserves.

Stablecoins: the central pillar

It’s worth noting that investor concern about U.S. stablecoin policy and how regulators may treat centralized issuers after the election is justified. The stablecoin sector has become a central pillar of cryptocurrency liquidity: dollar-pegged tokens in 2025 settled over $30 trillion across the supply chainand USDC alone has processed approximately $18 trillion in transactions – nearly half of all stablecoin volume, even though it represents less than a third of the total supply. Circle and third-party estimates put USDC’s share of total stablecoin transaction volume at around 45-50% at the end of 2025, even though its circulation represented less than one-third of the total stablecoin supply.

If Bernstein’s view is confirmed, Circle-related assets could see a rebound as regulatory clarity improves.

BTC's price is on the highs $71k on the daily chart. Source: BTCUSDC on Tradingview

Cover image from Perplexity, BTCUSDC chart from Tradingview