Regulatory disputes surrounding stablecoin yield mechanisms have caused significant market volatility. Influenced by recent developments regarding a proposed crypto market structure bill in the US Congress, several cryptocurrency-related stocks experienced substantial declines on Tuesday, as investors expressed concerns over potential impacts on stablecoin business models. Reports indicate that the Digital Asset Market Clarity Act, currently advancing in the US Senate, may include a key provision prohibiting platforms from paying yields to stablecoin holders in a manner similar to bank deposit interest. According to a draft email sent to members by the industry group Blockchain Association, the clause would forbid companies from paying interest "directly or indirectly" to users solely for holding stablecoins, but would permit reward mechanisms tied to genuine business activities, such as loyalty, promotional, or subscription-based incentives.

Affected by this news, shares of Circle Internet Corp. (CRCL.US) plummeted over 20% on Tuesday. Circle issues USDC, the world's second-largest stablecoin. Shares of its partner, Coinbase Global, Inc. (COIN.US), also fell more than 9.7%. The market widely worries that if yields are banned, it would diminish user incentive to hold stablecoins, thereby limiting the growth potential of products like USDC. In the current stablecoin model, issuers typically invest reserve funds in low-risk assets such as US Treasury bonds and reverse repurchase agreements, sharing the proceeds with distribution platforms. Some platforms also offer holding yields to attract capital; for example, Coinbase currently provides USDC holders with an annualized yield of approximately 3.5%.

This model has become a primary concern for traditional banks. Banking organizations argue that such products could divert deposits, potentially weakening the lending capacity of the banking system. The current controversy over the bill reflects the ongoing struggle between the crypto industry and the banking sector. Although the industry has long pushed for legislation to clarify the regulatory framework for crypto assets and escape the uncertainty of securities law, disagreements over "whether stablecoins should possess deposit-like attributes" remain pronounced. It is reported that the White House and several senators reached a preliminary compromise on the issue last week and have begun consultations with banks and crypto firms on specific terms.

The draft bill also suggests that the US Treasury Department, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) should develop more detailed rules to define under what circumstances yield payments are permitted. However, significant uncertainty remains regarding the bill's final passage. Some Democratic lawmakers insist on adding clauses restricting the President and their family from profiting from crypto investments, a move generally opposed by Republicans. Furthermore, with the US midterm elections approaching, the legislative window is narrowing. If progress is not made swiftly, the bill could be forced onto the back burner.

Analysts note that if the relevant legislation is delayed or fails, the crypto industry might face a stricter regulatory environment in the future. SEC Chairman Atkins recently stated that a clear regulatory framework is crucial for industry development; otherwise, future regulatory policies could revert to a more adversarial stance.