Citigroup: Stablecoin Incentive Cap may temporarily reduce USDC circulation but does not impact Circle's core revenue
BlockBeats News, March 26th, according to CoinDesk, Citigroup, the Wall Street bank, stated that the proposed restrictions on stablecoin rewards in the latest US market structure bill would pose some obstacles to Circle (CRCL) but not a fundamental threat to its investment thesis. Citigroup analyst Peter Christiansen pointed out that the bill prohibits earning interest on passive stablecoin balances but allows for reward programs tied to trading or payment activity. Since Circle has already transferred most of its reserve revenue to distribution partners such as Coinbase, the broader ban on third-party rewards will not directly impact Circle's net revenue. However, the analyst expects that the weakening of incentives for holding USDC may temporarily drag on circulation and secondary market liquidity. Citigroup maintains a high-risk rating for Circle stock with a target price of $243, with the stock price around $100 at the time of writing. Circle's stock price fell about 20% on Tuesday due to the bill news.
Bernstein, in a report on Wednesday, pointed out that Circle's Tuesday sell-off reflected a market misunderstanding of the "Clarity Act" bill. The market confused "who earns the interest" with "who distributes the interest" — Circle earns reserve revenue from the USDC-backed assets, while platforms like Coinbase pass on some of the revenue to users, the latter being the actual target of the proposed rules. Circle itself does not pay interest to holders, with reserve revenue for the 2025 fiscal year at $26.4 billion.
Bernstein noted that USDC's scale has grown from around $300 billion to $800 billion, being driven by transaction, payment, and collateral demand, not by interest. In addition, Coinbase has taken a cautious stance in the "Clarity Act" negotiations, as sources revealed that it privately expressed dissatisfaction with the latest compromise to Senate staff but did not publicly oppose the bill.
