Circle's Worst Single Day in History: Regulatory Draft Hits Core Revenue, Stock Value Evaporates $50 Billion

Author: Mario S.

Translation: Deep Tide TechFlow

Deep Tide Guide: Since its listing, Circle has experienced its largest single-day drop of 20%. This isn’t an isolated event but a result of simultaneous blows from regulation, business model vulnerabilities, and on-chain freezes.

This analysis clearly explains how 95.5% of Circle’s revenue depends on reserve interest income and also clarifies why the impact of this bill is much deeper than it appears on the surface.

Full text below:

On Tuesday, CRCL plummeted 20% in a single day, marking its largest intraday decline since listing, with a $5 billion market cap wiped out. Trading volume reached 56.4 million shares, nearly four times the 90-day average. Coinbase also fell 11% on the same day.

The entire stablecoin trading pricing was reset within hours. The trigger was a new draft of the “Clear Act,” which effectively ends passive income from stablecoins.

This is not just a story of a decline day. Behind it are regulatory battles, a business model flaw, and a wallet freeze event—all stacking together to cause a full-blown explosion of an already burning stock.

The “Clear Act” Bomb

On March 20, Senators Thom Tillis (Republican, North Carolina) and Angela Alsobrooks (Democrat, Maryland) announced a principled agreement on stablecoin yield provisions, with White House backing. The full text was disclosed at a closed-door meeting on Capitol Hill on Monday to crypto industry leaders.

Key provisions: Passive stablecoin yields earned solely by holding dollar-pegged tokens will be explicitly prohibited. Exchanges, brokers, and their affiliates are banned from offering yield on stablecoin balances directly or indirectly, or in any form “economically equivalent to interest.”

Active rewards tied to payments, transfers, or platform usage remain permitted. The SEC, CFTC, and Treasury will jointly define acceptable reward forms and anti-avoidance rules within a year. Notably, the SEC and CFTC recently announced a historic inter-agency memorandum, ending years of interdepartmental disputes.

Congress has just drawn a line in writing that the lobbying groups have been fighting for over two years: stablecoins can be used as payment tools but cannot replace deposits.

An internal stakeholder email obtained by Eleanor Terrett shows that an industry leader involved in the closed-door meeting described the draft as a “deviation” from previous discussions with the White House. He warned that the vague wording of “economic equivalence” could be interpreted more strictly by future regulators.

This hits Circle harder than anyone expected

Currently, 95.5% of Circle’s revenue comes from interest income on USDC reserves, explaining the market’s intense reaction.

CRCL issues USDC, holding reserves in short-term government bonds and overnight repurchase agreements, earning interest spreads. In Q4 2025, reserve income reached $711 million, up 60% year-over-year, driven by a 97% increase in USDC supply. Full-year 2025 revenue was $2.7 billion, up 64%.

The “Clear Act” does not directly target Circle’s reserve income (which CRCL earns itself), but it directly hits the demand engine for Circle. Currently, platforms like Coinbase pass on stablecoin yields to users as incentives for holding USDC. Coinbase’s stablecoin revenue in 2025 hit $1.35 billion, up from $910 million in 2024. If exchanges can no longer offer yield on USDC balances, users’ motivation to hold USDC instead of traditional bank deposits will be greatly weakened.

Reduced yield sharing → decreased USDC adoption → shrinking reserves → lower interest income for Circle.

Timing makes things worse. As the Federal Reserve cuts rates, reserve yields have fallen from 4.49% in Q4 2024 to 3.81% in Q4 2025. Although the market no longer expects rate cuts this year, before this bill emerged, Circle’s interest income was already under pressure.

USDC’s fundamentals have never been stronger

The stock price crash occurred on the same day that USDC’s underlying metrics hit all-time highs:

Circulating supply: Reached $81 billion by late March, higher than the $76 billion expected by the end of 2025.

On-chain trading volume: In Q4 2025 alone (adjusted), hit $6.8 trillion, more than doubling year-over-year.

USDC’s market share relative to USDT: Since August 2025, USDC trading volume has surpassed Tether’s USDT monthly, with over 80% market share in 2026.

Q4 earnings exceeded expectations: Revenue of $770 million, above the expected $745 million; EPS of $0.43, beating consensus by 23%.

Circle also announced a partnership with Sasai Fintech to expand into Africa and secured a significant integration deal with Intuit.

Wallet Freeze Adds Fuel to the Fire

Late Monday night, Circle froze USDC balances in 16 enterprise hot wallets, affecting multiple exchanges, casinos, and forex platforms, including FxPro, Pepperstone, AMarkets, and HeroFX.

The freeze reportedly stems from an undisclosed U.S. civil case. @zachxbt raised sharp questions, pointing out that anyone using basic on-chain tools can see these are operational business wallets handling thousands of transactions. He warned that the opaque freeze based on undisclosed civil litigation risks turning USDC into a “politicized censorship tool.”

The authority to freeze and wipe out balances of frozen addresses is explicitly written into USDC’s smart contract. But on a day when the market is already questioning the risks of centralized stablecoins, this move looks even worse.

Long-term reasons for optimism

This sell-off prices in the most pessimistic interpretation of the “Clear Act.” But there are also some points worth noting.

Active rewards are preserved. The bill draws a line between passive income (prohibited) and active incentives (permitted). Platforms like Coinbase are exploring workaround solutions: marketing incentives, activity-based payments, and partnerships with issuers that blur the line between interest and rewards. The vague “economic equivalence” wording means lawyers will find loopholes.

Coinbase’s profit impact may be limited. Most of Coinbase’s stablecoin revenue is directly passed to users, so this revenue often offsets related expenses. Analysts believe the direct profit impact is limited. The bigger concern is whether restrictions will slow USDC’s long-term adoption.

The bill is not yet law. Committee review is expected after the Easter recess in late April. Lobbying, amendments, and negotiations still have room. Brian Armstrong has remained silent on the latest draft, but his previous stance indicates Coinbase will strongly contest the “economic equivalence” wording.

Rapid growth in non-reserve revenue. Platform services, transaction processing, and other non-reserve income grew 15.3 times YoY in Q4 2025, reaching $37 million, with total other revenue for the year at $110 million. While interest income remains the main source, diversification is already underway.