Bernstein: "Clarity Act Compromise Strengthens Circle's Position Amid Record-High Stablecoin Supply"

On May 18, 2026, the total market capitalization of stablecoins reached a historic milestone of $321 billion. Bernstein analysts diagnosed that the ongoing legislative discussions in Washington have effectively solidified the competitive advantage of Circle, the issuer of USDC. This analysis comes at a time when the stablecoin market is expanding to an unprecedented scale, drawing industry attention.

The 'yield compromise' derived during the Senate's deliberation of the Clarity Act is expected to work in favor of Circle, which has an existing reserve-based revenue model. While market participants showed volatility upon news of the initial bill amendment, Bernstein analyzed that this regulation will serve as a strong barrier protecting Circle's established operating method over emerging yield-sharing models.

Bernstein predicted that the recent results of the Senate Banking Committee's deliberation on the Clarity Act would solidify Circle's market dominance. Some market participants increased the volatility of Circle (CRCL) stock prices by misunderstanding the news of tightened regulations, but analysts analyzed that in the long run, Circle's operating model would benefit the most from the regulatory environment. In particular, it is evaluated that Circle's position has become even firmer in competition with yield-distributing stablecoins.

"The Senate's Clarity Act amendment and yield compromise further strengthen Circle's model as the supply of dollar stablecoins increases."

According to the draft bill released in May 2026, covered entities cannot pay interest or yield to limited recipients simply for holding payment stablecoins. This 'yield compromise' protects the traditional banking model while setting clear boundaries for virtual asset companies' interest-paying activities. This is a factor that puts the brakes on the strategies of emerging competitors who intended to distribute profits directly to holders.

Circle's Revenue Engine and Reserve-Based Model

Circle's revenue structure is focused on expanding the circulation of USDC to secure interest income generated from reserves. In the 2025 fiscal year, Circle demonstrated strong financial performance by generating over $2.637 billion in revenue through reserve management. As the legislation restricts the distribution of profits to stablecoin holders, Circle is able to maintain high margin rates and exclusively enjoy a reserve-based revenue structure.

• Prohibition of direct interest payments for holding payment stablecoins
• Explicit differentiation of revenue structures from traditional financial systems
• Strengthening legal safeguards for compliant issuers
• Justification of the model where reserve management profits accrue to the issuer

The stablecoin market is currently showing explosive growth, with Tether (USDT) reaching an all-time high of $190 billion. Circle CEO Jeremy Allaire emphasized that the winner will be determined by actual economic utility rather than market capitalization. In fact, USDC and USDT dominate the market, accounting for over 99% of all on-chain stablecoin transactions, and the establishment of these regulations is expected to further solidify this oligopolistic structure.

With President Donald Trump signing the 'GENIUS Act,' which legislates the use of stablecoins, U.S. virtual asset policy has entered a new phase. Superform CEO Vikram Arun noted that the core question has shifted from whether regulation is permitted to 'how the U.S. wins.' The Clarity Act is analyzed to contribute to establishing U.S. stablecoin hegemony as a tool for such national competitive strategy.

Future Watch Points for Investors

Recently, Circle (CRCL) stock price has shown extreme volatility, fluctuating by more than 20% in a single day following regulatory news. Bernstein pointed out that investors are misreading the long-term implications of the Clarity Act, arguing that the resolution of regulatory uncertainty will lead to an increase in corporate value. Some analysts have even offered optimistic outlooks that Circle's stock price could reach the $200 level after the bill's passage.

• Whether the final legislative process for the Clarity Act will be completed in the second half of 2026
• Substantial market changes following the implementation of the GENIUS Act by the Trump administration
• Expansion of USDC circulation and the resulting further growth in reserve revenue
• The possibility of Circle (CRCL) stock reaching the $200 target price and market reaction