Key Highlights
Citigroup said proposed U.S. limits on stablecoin rewards could slow USDC growth in the short term.
Draft language tied to the Digital Asset Market Clarity Act would block bank-like yield on passive stablecoin balances, though some activity-based incentives may still be allowed.
Circle’s filings show its business is still driven mainly by reserve income, while a large share of USDC economics already flows to distribution partners such as Coinbase.
Citigroup says the latest draft restrictions on stablecoin rewards would likely slow USDC circulation growth, but would not materially damage Circle’s core business. The bank said the proposal could weigh on near-term scaling by making USDC less attractive to some holders, while leaving the broader investment case intact.
The market reacted much more sharply. Circle shares fell about 20% on March 24 after investors focused on draft language that would prevent platforms from offering a deposit-like yield on stablecoin balances. Reports on the proposal said the restrictions were aimed at passive rewards for simply holding stablecoins, while leaving room for narrower incentives linked to payments, trading, or other activity.
Citi’s main point is that this matters more for distribution than for issuance. Circle does not run its model by paying passive yield directly to USDC holders. In its September 2025 filing, the company said reserve income made up 96.3% of total revenue for the first nine months of 2025. The same filing also showed that under its agreement with Coinbase, Circle keeps an issuer-retention slice of the payment base, while Coinbase receives economics tied to USDC held on its platform and 50% of the remaining payment base after certain deductions.
