Summary Circle Internet Group, Inc. shares plunged over 20% after legislative uncertainty around the Clarity Act threatened stablecoin yield models. CRCL’s revenue is highly dependent on interest from USDC reserves, with Q1 interest revenue projected near $656 million if USDC averages $75 billion in circulation. Recent USDC circulation rebounded toward its peak, but Street Q1 revenue estimates of $719 million may still be too optimistic. Tuesday was a very bad day for shareholders of Circle Internet Group, Inc. ( CRCL ). The company behind the USDC stablecoin saw its shares drop more than 20%, the worst trading day percentage wise since the company went public. The culprit seemingly was some potentially bad news on legislation regarding the Clarity Act, which could limit the future potential of the stablecoin space. Previous coverage of the name My most recent article on Circle came back in January, at which point I detailed a couple of major headwinds the company was facing. With U.S. interest rates dropping and USDC in circulation pulling back, it appeared that Circle's Q1 street revenue estimates were too high. Shares have rallied back more than 36% since, despite the S&P 500 (SP500) being down more than 5% over that time. However, Circle still remains well below its all-time high of just under $299 that was reached shortly after going public. Recent legislative news When President Trump was re-elected in 2024, the entire crypto industry celebrated as they believed he would be a major supporter of the space. Bitcoin (BTC-USD) surged to a new all-time high, stablecoins like USDC saw tremendous growth in circulation, and it seemed like nothing was impossible. Last year, a crypto winter started with prices falling, and the future of the industry suddenly didn't look as bright. Earlier this week, some proposed new legislation regarding stablecoins seemingly put things into question for companies like Circle. The latest draft of the Clarity Act would ban stablecoin issuers from paying yield to customers just for holding the assets. Earning yields on balances, otherwise known as rewards, is an incentive for holding the coins, basically like getting interest on your deposits at a bank. The latest part of the bill would potentially still allow for yields to be generated by using the stablecoin for payments, trading, or lending it out. In recent years, major banks have been opponents of stablecoin yields, as they are seen as a potential competitor. At a minimum, the latest news out of D.C. at least provides more uncertainty for the future of stablecoins, and it is not clear when and if final legislation will make it up for a vote. An update on USDC growth As a reminder, Circle generates a majority of its revenue from interest on the reserves that back the USDC stablecoin. 2025 was a huge year for USDC in circulation growth, surging by more than $31 billion. While U.S. interest rates declined, Circle was still able to report record revenue in Q4 that handily beat street estimates, rising 77% over the prior year period. After topping out in mid-Q4 at around $78.5 billion, USDC in circulation took a hit as crypto prices fell. The number fell to around $70 billion earlier this year, but it has risen back towards new highs during March. Circle in most of its recent quarters had generated interest on its reserves that comes in almost 20 basis points below SOFR , which means in Q1 should be a net return of about 3.50% on an annualized basis. While there is still some time left in the quarter, let's assume that USDC in circulation averaged about $75 billion for the quarter. That would mean about $656 million in interest revenue for Circle, and other revenues in the period could be around $40 million as management has guided to full year other revenues of $150 million to $170 million for the year. In the chart below, you can see how Street estimates for Q1 have trended over time. Circle Q1 2026 Revenue Estimate (Seeking Alpha) Currently at $719 million, I still think the Street is a little too high for Q1 at the moment. There's still plenty of time for numbers to change, however, as we don't yet know how much USDC in circulation there will be at the end of the quarter. Perhaps the good news for Circle on the interest rate front is that expectations no longer call for multiple rate cuts from the Fed this year, which would eat further into the return rate that the company generates. The current valuation picture Circle trades at more than 91 times its expected adjusted earnings per share as of midday Wednesday. That's still well above the more than 48 times that Coinbase Global, Inc. ( COIN ) goes for. Both firms are expected to see their adjusted earnings decline this year, and a lot more so for Circle. However, Circle is expected to show more than 13% revenue growth this year, while Coinbase is projected for just 1.25%. On a price-to-sales basis, Circle has again flipped to being more expensive, going for 8.10 times this year's projected revenue, with Coinbase around 6.65 times. When it comes to Street analysts, the picture is very bullish currently . Of the 23 analysts covering the stock, 9 have Strong Buy ratings, with 2 more having Buy ratings. There are 11 analysts with Hold ratings and 1 with a Strong Sell. The average price target is nearly $128, implying more than 22% upside from current levels. I should note, however, that the Street average has come down by $12 since my previous article, and it was $235 in the stock's early trading days, so analysts have reduced their valuations a bit over time. Final thoughts and recommendation Circle had its worst public trading day yet on Tuesday, as shares fell more than 20% due to potential legislative headwinds. There now seems to be an effort in Congress to limit stablecoin yields, potentially putting a major roadblock in front of the future of this emerging business. With the big banks trying to fight off this evolving financial technology, it remains to be seen what the final legislation will end up being. Until we get a better idea of how this will all turn out, I am going to remain neutral on Circle shares. The latest news could turn out to be a major negative, but nothing is finalized just yet. On the flip side, USDC in circulation has rebounded from the early 2026 lows, and a lack of Fed rate cuts is good for the company's interest generation on reserves. I do think Q1 estimates still remain a little high, but at the moment the potential legislative roadblock could turn out to be a much larger issue than a single quarter's results.
