Circle gains edge as Clarity Act yield limits support stablecoin model

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Clarity Act aids Circle, USDC

Highlights

Clarity Act's compromise bars stablecoin issuers from paying bank-like interest on passive balances, structurally benefiting Circle, whose USDC incentives are usage-based.
Bernstein maintains Circle's Outperform rating with a $190 target versus a $114 close on May 15, calling the Act a key factor preserving Circle's float income model.
USDC's adjusted volume share rose to 60% from 41% year over year, while x402 protocol hit 112 million transactions and $16 million in volume since May 2025.

Clarity Act compromise reshapes issuer competition

As reported by The Block, Bernstein says the Clarity Act's latest compromise language bars stablecoin issuers from paying interest that works like a bank deposit on passive balances, while still allowing rewards linked to genuine activity such as trading and payments.

The analysts say that distinction structurally favors Circle because the company does not directly offer passive yield on USDC holdings. Instead, incentives around USDC come through partners and usage-based programs, a setup Bernstein views as protected under the current language. In its note to clients, the firm says this effectively ends a rate competition that could have let smaller or less liquid issuers win share by offering higher payouts.

Bernstein adds that framing stablecoins as payment instruments rather than deposit substitutes helps preserve the durability of Circle's float income model. The firm maintains an Outperform rating on Circle with a $190 price target, while Circle closed at $114 on May 15. Coinbase also keeps an Outperform rating from Bernstein, with a $330 target against a $195.43 close.

Record supply and agentic payments widen growth outlook

Total dollar-backed stablecoin supply reaches more than $300 billion as of Monday, with Tether's USDT holding the largest share and USDC in second place. Together, the two tokens account for about 97% of supply despite broader competition, while adjusted stablecoin volumes, excluding bot activity, track at $15 trillion a month based on April data, up from about $11 trillion in 2025.

On an annualized basis, volumes run at $100 trillion, versus $55 trillion in 2025. Bernstein's analysis of Visa onchain data shows USDC's share of adjusted volumes rises to 60% from 41% year over year, driven by gains in spot trading and wallet-to-wallet transfers.

Bernstein sees a larger long-term opportunity in agentic payments, where software uses stablecoins to pay other software. The firm says USDC already handles more than 99% of x402-based settlements globally. Since launching in May 2025, the x402 protocol records 112 million cumulative transactions and $16 million in cumulative payment volume.

Circle has expanded its Agent Stack with multichain wallets, gas-free USDC transfers, a marketplace for service discovery and a unified command-line interface for wallet provisioning and transaction integration. The same x402 infrastructure is also drawing support from Coinbase and has moved into the Linux Foundation with governance contributions from Cloudflare, AWS, Stripe, Shopify and Google. Circle's ARC blockchain for institutional payments processes 244 million cumulative testnet transactions since its October 2025 launch, with 1.6 million unique wallets transacting in the first quarter.

Our earlier article on KBRA’s rating action on Pinnacle Bancorp explained that the agency affirmed the group’s credit ratings with a Stable outlook as profitability and funding metrics recovered from elevated deposit costs and a low-yielding securities mix. We also highlighted the rebound in net interest margin alongside strong capital levels and consistently low credit losses as key factors supporting the ratings.

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