Circle Internet Corp. (CRCL) saw its stock price plummet by 5.16% in pre-market trading on Thursday, following a controversial update to its USDC stablecoin policy. The company announced changes to its terms of service that now allow the use of USDC for "lawful" firearms purchases, a move that has sparked debate and potentially rattled investors.

The policy update, which reverses Circle's previous stance prohibiting USDC transactions for weapons of any kind, came after pressure from conservative and gun rights groups. A Circle spokesperson stated, "Circle has clarified its terms to reflect that USDC can be used for lawful firearms purchases and sales protected by the Second Amendment." This change aligns the company's policy with constitutional rights but has raised concerns among some investors about potential reputational risks and the company's strategic direction.

The sharp stock price decline suggests that the market may be reacting negatively to this policy shift. Investors might be worried about the potential backlash from anti-gun advocates or the broader implications of Circle's involvement in politically sensitive issues. Additionally, the move could be seen as a departure from the company's previous stance, potentially raising questions about Circle's governance and decision-making processes. As the day progresses, market participants will be closely watching for any further statements from Circle or reactions from major stakeholders that could provide more clarity on the long-term implications of this policy change.