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

Long positions still have reasons to exist.

Author: Mario S.

Translation: Deep潮 TechFlow

Deep潮 Guide: Circle’s largest single-day drop of 20% since going public is not 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 why the impact of this bill is much deeper than it appears on the surface.

Full Text:

On Tuesday, CRCL plummeted 20% in a single day, marking the largest intraday decline since its 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 a regulatory showdown, a business model flaw, and a wallet freeze event—all stacking together to trigger 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 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 explicitly drawn the line that the banking lobby has been fighting for two years: stablecoins can be used as a payment tool 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

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. Total revenue for 2025 was $2.7 billion, up 64%.

The “Clear Act” does not directly target Circle’s reserve income (which CRCL earns itself), but it directly impacts Circle’s demand engine. 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 → Lower USDC adoption → Smaller reserves → Decreased interest income for Circle.

The 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 appeared, Circle’s interest income was already under pressure.

USDC’s fundamentals have never been stronger

The stock price crash occurred on the same day USDC’s underlying metrics hit record 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, 23% above consensus.

Circle also announced entering Africa through Sasai Fintech partnership and secured key integrations with Intuit.

Wallet freezes add fuel to the fire

Late Monday night, Circle froze USDC balances in 16 enterprise 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 opaque freezes based on undisclosed civil litigation could turn USDC into a “politicized censorship tool.”

The authority to freeze and wipe balances from 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 operation looks even worse.

Long positions still have reasons to exist

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

Active rewards can be 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 collaborations with issuers that blur the line between interest and rewards. The vague wording of “economic equivalence” means lawyers will find loopholes.

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

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

Non-reserve revenue growth is rapid. Platform services, transaction processing, and other non-reserve income grew 15.3 times year-over-year in Q4 2025, reaching $37 million, with total other revenue for the year at $110 million. While interest income remains small, diversification of revenue streams is already underway.