Stablecoin profit mechanism faces regulatory constraints Circle (CRCL.US) and Coinbase (COIN.US) stock prices plummeted

The regulatory controversy surrounding the stablecoin yield mechanism has triggered sharp market fluctuations. Influenced by the latest developments in the proposed Cryptocurrency Market Structure Act by the US Congress, several cryptocurrency-related concept stocks experienced significant declines on Tuesday, with investors expressing concerns about the potential impact on the stablecoin business model. Reports indicate that the US Senate is advancing the Digital Asset Market Clarity Act, which may include a key provision that prohibits platforms from paying interest to stablecoin holders in a manner similar to bank deposit interest. According to a draft email sent to members by the industry organization Blockchain Association, this provision would prohibit companies from directly or indirectly paying interest to users who only hold stablecoins, but would allow for reward mechanisms related to real business activities, such as loyalty, promotions, or subscription incentives. As a result, Circle (CRCL.US) saw its share price fall by over 20% on Tuesday, and its stablecoin USDC is the second largest stablecoin globally; partner Coinbase (COIN.US) also saw a decline of over 9.7%. The market is generally concerned that banning yields could weaken the incentive for users 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, and share profits with distribution platforms. Some platforms also offer yield to users to attract funds, such as Coinbase currently offering around 3.5% annualized yield to USDC holders. This model has also become a major source of concern for traditional banks. Banking organizations believe that such products may divert deposits, thereby weakening the lending capacity of the banking system. The controversy over this bill is a reflection of the ongoing struggle between the cryptocurrency industry and the banking industry. Despite the industry pushing for legislative clarity in regulating cryptocurrency assets for years to eliminate uncertainty about securities law, disagreements over whether stablecoins should have deposit-like attributes remain apparent. It is reported that the White House and several senators reached a preliminary compromise on the issue last week, and have begun discussions with banks and cryptocurrency companies on specific terms. The draft also suggests the US Department of Treasury, Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC) should develop more detailed rules to define under what circumstances yield payments are allowed. However, there is still significant uncertainty regarding whether this bill will ultimately pass. Some Democratic lawmakers insist on including provisions to restrict the president and his family from benefiting from cryptocurrency investments, which is widely opposed by Republicans. Furthermore, with the mid-term elections approaching in the US, the legislative window is narrowing, and if it cannot be pushed forward quickly, the bill may be forced to be shelved. Analysts point out that if the related legislation is delayed or fails, the cryptocurrency industry may face a stricter regulatory environment in the future. SEC Chairman Gensler recently stated that a clear regulatory framework is crucial for the industry's development, otherwise future regulatory policies may revert to a more adversarial stance.