Bernstein analysts say the Senate Clarity Act’s yield compromise could make Circle Internet Group one of the clearest beneficiaries of a more defined U.S. stablecoin rulebook.
The core issue is simple but important for investors, fintech operators, exchanges, and businesses choosing stablecoin infrastructure: whether issuers can compete by paying passive yield on stablecoin balances, or whether stablecoins remain framed mainly as payment instruments.
In Bernstein’s reading, the current compromise leans toward the second outcome. That matters because Circle’s USDC business is built around distribution, payments, liquidity, and reserve income, not direct interest payments to holders. If the bill keeps passive stablecoin yield off limits while still allowing activity-based rewards, Bernstein argues Circle’s existing model looks more defensible.
The legislation is not finished. The Senate markup was a meaningful step, not a final law. But for buyers and builders comparing stablecoin networks, the direction of travel is worth watching because it could affect incentives, partner economics, and the long-term competitive position of USDC, USDT, and newer dollar-backed tokens.
What The Yield Compromise Changes
U.S. policymakers advanced the Clarity Act in a 15-9 markup vote on May 14, moving the bill through an important committee stage. The compromise language addresses one of the most commercially sensitive questions in stablecoins: whether issuers can pay interest on passive token balances in a way that resembles a bank deposit.
Under the version described by Bernstein, issuers would be prohibited from paying interest that is economically or functionally equivalent to deposit interest on passive stablecoin balances. At the same time, the language would preserve rewards connected to bona fide activity, including trading, payments, and other usage-based incentives.
That distinction is the heart of Bernstein’s bullish view on Circle. Circle does not directly offer passive yield on USDC balances. Its partners, including Coinbase, have used distribution arrangements and rewards programs connected to USDC usage instead. Bernstein believes the compromise could protect that kind of activity-linked model while limiting a direct rate war among issuers.
The analysts led by Gautam Chhugani argued that the bill could reduce the risk of a yield pass-through arms race, which had been a recurring investor concern. That interpretation has not been independently verified beyond Bernstein’s analysis, and the final legislative text could still change before passage.
For stablecoin buyers, the practical question is not only which token has the largest supply today. It is which model can survive regulation, maintain liquidity, and keep commercial partners engaged without relying on deposit-like incentives.
Circle, Coinbase And Tether: Different Stakes In The Same Bill
Bernstein carries an Outperform rating and a $190 price target on Circle, according to the source report. Circle closed at $114 on May 15, which Bernstein framed as implying roughly 67% upside. Coinbase also holds an Outperform rating from Bernstein, with a $330 target against a $195.43 close.
Those targets are analyst views, not guarantees. They matter here because they show how Bernstein is connecting the regulatory compromise to public-market valuation. Circle’s economics depend heavily on the income it earns from reserves backing USDC. If stablecoin issuers were forced into a broad race to pass more yield through to users, that could pressure margins. If passive yield remains restricted, Bernstein sees Circle’s float-income model as more durable.
Tether remains the largest stablecoin issuer by supply, while USDC remains the main second-place dollar stablecoin. The source article says dollar-backed stablecoin supply reached more than $300 billion and that USDT and USDC together account for roughly 97% of supply, according to The Block’s data. Those specific market-share figures should be treated as source-reported rather than independently confirmed here.
| Player | Position In The Source Report | Why It Matters For Buyers |
|---|---|---|
| Circle / USDC | Bernstein sees the yield compromise as structurally favorable to Circle’s model. | USDC may look more attractive where regulated payments, partner programs, and activity-based incentives matter. |
| Coinbase | Coinbase is a major USDC distribution partner and is also building around x402 infrastructure. | Exchanges and app builders may watch Coinbase’s role as a bridge between retail users, developer tools, and USDC usage. |
| Tether / USDT | USDT remains the dominant stablecoin by supply in the source report. | Liquidity and global exchange support still matter, even if U.S. regulatory clarity strengthens USDC’s institutional case. |
| New issuers | The compromise may limit competition based mainly on passive yield. | New entrants may need stronger distribution, compliance, payments utility, or ecosystem partnerships instead of simply offering higher rates. |
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The buyer takeaway is that stablecoin selection is becoming less about headline supply alone. A treasury team, payment startup, exchange, or wallet provider has to weigh liquidity, regulatory posture, incentive structure, custody arrangements, chain support, and developer tooling.
Why Bernstein Focuses On Payments, Not Deposits
Bernstein’s argument depends on a larger framing: stablecoins should be treated as payment instruments rather than deposit substitutes. If that view becomes embedded in U.S. law, stablecoin issuers would face a more limited path for paying passive holders, while still being able to support rewards tied to actual usage.
That would fit Circle’s current posture. USDC has been positioned as a regulated dollar token for payments, settlement, trading, and institutional workflows. Circle earns income from reserves, while its ecosystem partners can use commercial arrangements to encourage USDC adoption.
For users, the distinction can be subtle. A passive yield product and a usage-based reward may both feel like a benefit for holding or using a stablecoin. For regulators and issuers, the distinction is much larger. Deposit-like yield raises bank competition, securities, and consumer-protection questions. Activity-linked rewards can be framed more like commercial incentives in a payments network.
That is why the compromise has strategic weight. If the final bill keeps the same shape, stablecoin issuers with strong distribution and payments usage may have an advantage over issuers that planned to win share mainly by passing through reserve yield.
The risk is that the bill is still unfinished. Investors and enterprise buyers should not treat the markup language as settled law. The current version shows where the debate is heading, but the final version could change through Senate negotiations, floor amendments, or House reconciliation.
The Agentic Payments Angle
Bernstein also points to agentic payments as a possible next growth leg for stablecoins. This is the part of the thesis most relevant to developers, payment infrastructure companies, and platforms building automated commerce between software agents.
The source report says annualized stablecoin transaction volumes are tracking at $100 trillion versus $55 trillion in 2025, and that USDC already commands 99% of x402 settlements. Those figures are presented as Bernstein’s analysis and should not be treated as independently verified here.
The direction of the argument is still clear. If software agents, APIs, and automated services need to pay each other in very small increments, stablecoins are a natural candidate. Traditional card rails and bank transfers are not always built for instant, tiny, machine-triggered payments.
Circle has built an Agent Stack that includes multichain wallets, gas-free USDC transfers at very small denominations, an agent marketplace for service discovery, and a unified command-line interface for wallet provisioning and transaction integration. The x402 protocol is designed as an open standard for software-to-software payments using stablecoins.
According to the source report, x402 has accumulated 112 million cumulative transactions and $16 million in cumulative payment volume since its May 2025 launch, with USDC handling more than 99% of x402-based agentic payments globally. Those are source-reported figures, not independently verified in this rewrite.
Coinbase is also building on x402 infrastructure. The protocol has moved into the Linux Foundation, with governance contributions from major technology and commerce companies named in the source report, including Cloudflare, AWS, Stripe, Shopify, and Google.
For buyers comparing stablecoin rails, the agentic payments story creates a different set of decision criteria:
- Does the stablecoin have enough liquidity across the chains and venues your product needs?
- Can the issuer or partner ecosystem support automated, low-value, high-frequency payments?
- Are developer tools mature enough for wallet creation, signing, compliance, and settlement?
- Does the regulatory model support payments usage without turning every balance into a yield product?
- Are incentives tied to real activity rather than passive balance gathering?
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ARC Adds Another Layer To Circle’s Strategy
The source report also discusses Circle’s ARC blockchain, which is built for institutional payments and integrated with its agentic stack. Bernstein describes ARC as complementary to Circle’s broader stablecoin strategy because it uses USDC as native gas and is designed around institutional payment use cases.
According to the source article, ARC has processed 244 million cumulative testnet transactions since its October 2025 launch, with 1.6 million unique wallets transacting in the first quarter. The report also says an 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. These figures are source-reported and should be read in that context.
The commercial logic is straightforward. If Circle can pair USDC liquidity with developer tooling, agentic payments, and a dedicated institutional payments chain, it may be able to defend more than just stablecoin issuance. It can compete as infrastructure.
That does not remove execution risk. Testnet activity is not the same as durable mainnet adoption. Institutional payment chains need compliance, reliability, integrations, and a reason for users to shift behavior. But Bernstein’s view is that regulatory clarity, USDC-native infrastructure, and payments-focused incentives could reinforce each other.
What Still Has To Happen Before The Bill Becomes Law
The markup vote does not complete the legislative process. Three major steps remain before the Clarity Act can become law.
- The Senate Banking Committee version must be merged with the parallel Senate Agriculture Committee bill into unified text.
- The merged bill must clear the full Senate, where 60 votes are required.
- The House and Senate must reconcile their versions before a final bill can be sent forward.
The House passed its own version of the Clarity Act in July 2025, according to the source report. That means the final shape of the bill will depend on bicameral negotiation, not only the Senate Banking language.
Prediction markets and industry executives have expressed optimism about passage in 2026, while some legal and strategy executives remain less certain. The source report cites Polymarket odds of 62% for passage in 2026, Coinbase Chief Legal Officer Paul Grewal expecting passage this summer, and GSR Chief Legal and Strategy Officer Joshua Riezman seeing a 50/50 chance. Those views are useful sentiment markers, not settled outcomes.
Decision View: Who Benefits If Bernstein Is Right?
If Bernstein’s interpretation holds, Circle appears to benefit most directly. A restriction on passive stablecoin yield would reduce pressure on its reserve-income model and make distribution, compliance, and payments utility more important competitive levers.
Coinbase could also benefit because it sits close to USDC distribution and x402 development. If usage-based rewards remain allowed, Coinbase may retain room to support USDC adoption without depending on a direct issuer-paid passive yield structure.
Tether’s position is different. USDT’s global liquidity remains substantial, and regulation in the United States does not automatically erase its exchange dominance. But a clearer U.S. framework could make USDC more attractive for institutions, payment companies, and regulated platforms that care more about compliance posture than offshore liquidity.
New stablecoin issuers may face the hardest tradeoff. If they cannot win users by simply paying higher passive rates, they will need a sharper reason to exist: better distribution, lower costs, stronger compliance, specialized chain support, merchant integrations, or differentiated payment features.
For a business choosing stablecoin infrastructure, the practical conclusion is not that one token wins every use case. It is that regulation may push the market toward more durable competitive criteria.
| Buyer Priority | Why The Clarity Act Debate Matters |
|---|---|
| Yield sensitivity | Passive stablecoin yield may be limited if the compromise survives. |
| Payments utility | Usage-based rewards and payment activity may remain more viable than deposit-like incentives. |
| Institutional adoption | A clearer U.S. framework could favor issuers with compliance-first positioning. |
| Developer tooling | x402, agent wallets, and automated payments could become more important selection factors. |
| Liquidity | USDT and USDC still dominate the practical stablecoin landscape in the source report. |
The Bottom Line
Bernstein’s thesis is that the Clarity Act yield compromise does more than settle a policy dispute. It could shape how stablecoin issuers compete.
If passive yield is restricted while activity-based rewards remain available, Circle’s model looks better protected than a market where every issuer is forced into a rate war. That would support USDC’s role in payments, trading, partner rewards, and emerging agentic payment systems.
The case is still conditional. The bill is not law, the final language may change, and several of the market-share and transaction-volume figures in the source report are best treated as Bernstein or source-reported analysis rather than independently confirmed facts.
Even with those cautions, the strategic issue is clear. Stablecoin competition is moving beyond supply totals. The next phase may be decided by regulation, distribution, payments usage, developer infrastructure, and whether tokens behave more like payment rails than bank accounts.
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