Circle (CRCL) was hit much harder than Coinbase (COIN) in Tuesday’s sharp sell-off due to the CLARITY Act’s latest stance on stablecoin performance, but one analyst says the regulatory change may ultimately favor the stablecoin issuer.
Both names are seeing modest bounces on Wednesday, but remain solidly lower since the news leaked Monday night.
The market may be overlooking the long-term implications, argued Markus Thielen, founder of 10x Research: In its current form, the bill weakens Coinbase’s distribution-driven model more than Circle’s infrastructure role.
Coinbase currently captures the majority of the USDC economics through its distribution agreement with Circle, Thielen explained. For USDC held on Coinbase, the exchange receives almost all of the associated interest income, while off-platform balances are typically split 50-50. In practice, Thielen estimates that Circle pays Coinbase more than $900 million in shared revenue each year, about half of Circle’s total revenue.
That deal has turned stablecoin revenue into a high-margin business for Coinbase. But if regulators eliminate yield-like rewards on balances, some of that advantage may fade, Thielen said.
“The setup increasingly favors Circle on a relative basis,” Thielen wrote, arguing that the federal framework would shift value toward regulated issuers with compliance, scale and a credible balance sheet.
That could matter even more ahead of the two companies’ next business renegotiation in August 2026. Under a stricter federal regime, Thielen sees greater chances of Circle getting better terms.
The circle could be worth double
Meanwhile, Bitwise CIO Matt Hougan said the sell-off in Circle appears “overblown” as the CLARITY Act does not change the long-term investment case.
Performance has not been the main draw for stablecoins, he wrote in a Wednesday note. Most stablecoins do not pay interest, but their adoption has increased because they facilitate the movement of dollars across borders, the settlement of transactions, and access to blockchain-based financial avenues. In that sense, restricting performance doesn’t change the primary use case.
Hougan points to forecasts that project the market could grow to $1.9 trillion, or even $4 trillion, by the end of the decade. Circle, with a strong position in regulated stablecoins, will benefit if more activity shifts to local, compliant players.
He also sees a potential benefit from regulation itself. Limiting the pass-through of yield could reduce the revenue Circle shares with partners like Coinbase, which would help improve margins over time.
All told, Hougan sees a path for Circle to grow to a much higher valuation: potentially around $75 billion, about double its current level.
“If stablecoins work the way people think,” Hougan wrote, “you can be pretty conservative in most assumptions and still find Circle attractive.”
