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The compromise prohibits issuers from paying interest that is economically or functionally equivalent to a bank deposit on passive stablecoin balances, while explicitly preserving rewards tied to bona fide activities such as trading, payments, and other usage-driven incentives.
Notably, Circle does not directly offer passive yield on $USDC balances, with partners such as Coinbase instead using distribution arrangements and rewards programs tied to $USDC usage.
Bernstein reads the language as protecting those activity-based and distribution-linked incentive structures underpinning $USDC's growth. It also forecloses the yield pass-through arms race that had been a persistent investor concern, thereby allowing less-liquid issuers to gain share by simply outbidding on rates, the analysts led by Gautam Chhugani argued in a Monday note to clients.
By cementing stablecoins as payment instruments rather than deposit substitutes, the legislation protects the durability of Circle's float income model, the firm said.
Circle’s position
Bernstein carries an Outperform rating and $190 price target on Circle (CRCL), which closed at $114 on May 15, implying roughly 67% upside from current levels. Coinbase (COIN) also holds an Outperform rating with a $330 target against a $195.43 close.
The market data running in the background has moved sharply. Total dollar-backed stablecoin supply reached an all-time high of over $300 billion as of Monday, with Tether's USDT commanding the lion's share and $USDC holding second place. The two together account for roughly 97% of supply despite increasing competition, according to The Block's data.
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In terms of transaction volumes, the shift is steeper. Adjusted stablecoin volumes — stripped of bot activity — are tracking at $15 trillion monthly based on April data, up from approximately $11 trillion in 2025.
Total volumes on an annualized basis are running at $100 trillion, double last year's $55 trillion. $USDC's share of adjusted volumes has climbed from 41% to 60% year-over-year, driven by gains in spot trading and wallet-to-wallet transactions, per Bernstein's analysis of Visa onchain data.
However, the agentic payments layer is where Bernstein sees the longer-range upside compounding.
Circle has built out a full Agent Stack covering permissionless multichain wallets, gas-free $USDC transfers as small as $0.000001, an agent marketplace for service discovery, and a unified command-line interface for wallet provisioning and transaction integration.
The x402 protocol — an open standard that lets software pay other software using stablecoins — has accumulated 112 million cumulative transactions and $16 million in cumulative payment volumes since its May 2025 launch. $USDC currently handles more than 99% of all x402-based agentic payments globally.
Coinbase has also been building on the same x402 infrastructure. The protocol has since moved into the Linux Foundation, with governance contributions from Cloudflare, AWS, Stripe, Shopify, and Google. Circle's $ARC blockchain, built for institutional payments and integrated with its agentic stack, has processed 244 million cumulative testnet transactions since its October 2025 launch, with 1.6 million unique wallets transacting in the first quarter.
The $ARC token presale raised $222 million at a $3 billion fully diluted network value from investors, including a16z crypto, Apollo Funds, ARK Invest, and BlackRock. The Block previously reported that Bernstein maintained its $190 Circle price target as the $ARC presale cushioned near-term rate pressure.
$ARC features $USDC as native gas and what Bernstein described as quantum-ready architecture, complementary features that should propel Circle’s position under a clarified regulatory regime, according to Bernstein.
Work in progress
It’s important to note that three legislative stages remain before the bill becomes law, despite last week's markup passage.
The Senate Banking Committee version must first be merged with the parallel Senate Agriculture Committee bill into a unified text.
The merged bill then requires 60 votes to clear the full Senate floor. The House passed its own version of the Clarity Act in July 2025 and must also reconcile its text with whatever emerges from the Senate.
Polymarket currently puts the odds of passage in 2026 at 62%. Optimism on prediction markets echoes a bullish outlook from industry bigwigs like Coinbase CLO Paul Grewal, who expects the bill to pass this summer. However, not everyone is convinced, as GSR Chief Legal and Strategy Officer Joshua Riezman sees a 50/50 chance.
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