Original author/ 10x Research
Compiled by Odaily Odaily Golem ( @web3_golem )
This article explores the impact of the Clarity Act on DeFi and analyzes the potential risks to winners and losers in terms of investment should the act be implemented. While there are clear structural beneficiaries, the final outcome will not be one where only one company benefits. At the same time, investors should closely monitor new adverse factors that could impact the overall landscape.
The latest CLARITY proposal effectively ends the narrative of stablecoins as savings products . While yield sharing is still permitted, the path to passing yields to end users has been severed. Coinbase can continue to profit from USDC, but it loses its most powerful growth lever—offering yields to users—which poses a structural hindrance to its distribution model. Meanwhile, Circle now needs to prove that its arrangements are legitimate profit sharing rather than yield evasion, which brings higher legal risks, potential contract restructuring, and ongoing regulatory scrutiny.
Essentially, this is about control over the money market. Stablecoins are strictly defined as payment instruments rather than interest-bearing assets , effectively isolating returns within banks and regulated financial instruments (such as money market funds and ETFs like IQMM), which represents a recentralization of returns.
USDC Outstanding Balance and USDC Trading Volume
The implementation of the CLARITY Act will be detrimental to DeFi.
While the CLARITY framework is structurally advantageous to Circle, supporting USDC adoption and valuation, it also presents significant headwinds for DeFi, even at the cost of reduced flexibility (e.g., yield sharing, incentive mechanisms) and margin compression in the short term. Many DeFi tokens and activities may require registration and compliance reviews, especially where governance and fee generation mechanisms resemble equity structures.
Some argue that the CLARITY framework could benefit DeFi because yield restrictions would encourage users to shift to DeFi lending. However, this view rests on the premise that DeFi is unregulated. In reality, the CLARITY framework will likely extend to the front-end interface and limit the use of stablecoins in DeFi.
UNI-USDT vs. Uniswap V3 TVL – DeFi Momentum Weak
10x argues that DeFi is not a beneficiary, but rather a loser. Structurally, this is negative for DeFi tokens because reduced flexibility, stricter compliance, and potential restrictions on stablecoin usage will all put pressure on liquidity, activity, and eventual valuations.
The key overlap lies in stablecoins. Both Circle (CRCL) and Uniswap heavily rely on USDC as the core liquidity for trading and settlement. For Uniswap, stricter regulations could put pressure on the front-end interface, token listings, and liquidity incentive mechanisms, and may introduce KYC and compliance layers. This will directly impact fee revenue, token velocity, and permissionless access, and could lead to decreased trading volume, reduced composability, and shrinking liquidity pools.
CRCL (white) vs. UNI-USDT (indigo) – Circle is decoupling from DeFi.
Under the CLARITY Act, the most vulnerable assets are DeFi tokens and governance tokens pegged to transaction fees. DEX tokens such as UNI, SUSHI, DYDX, 1INCH, and CAKE face direct risk because their governance plus yield models resemble equity and may require a regulated front end. Similarly, lending and yield protocols like AAVE and COMP are also under scrutiny for their interest structures and revenue-sharing mechanisms, which could be classified as unregistered financial products.
MKR will become a beneficiary of the trend of revenue recentralization.
The market appears to have largely priced in these factors, making a structural revaluation driven solely by the CLARITY Act unlikely. MKR outperformed USDT in 2026 thanks to its unique positioning within the evolving yield landscape. Unlike most DeFi tokens, Maker generates real-world returns through investments in US Treasury bonds and other real-world assets, which are ultimately distributed to MKR holders via a surplus mechanism.
In a regulatory environment where stablecoin yields are increasingly restricted at the user level, value is concentrating at the issuer or protocol level, and Maker's structure has enabled it to benefit from this shift. Therefore, MKR's pricing is viewed more as a yield-generating "crypto market interest" than a speculative DeFi token. MKR/USDT also appears to be an indicator of its leading position over CRCL.
MKR/USDT (white) vs. CRCL (indigo)
At the same time, MKR stands in stark contrast to stablecoins like USDT, which, despite their massive scale, do not directly transfer economic value to token holders. This creates a structural difference, especially given that high interest rates continue to support Maker's revenue streams.
Importantly, MKR is more of a special case. While most DeFi tokens face the adverse effects of tightening regulations and restrictions on stablecoin usage, Maker's early integration of real-world assets and its semi-compliant structure have made it a beneficiary of the yield recentralization trend.
More broadly, most DeFi protocols rely on USDC as collateral and settlement infrastructure. If regulations restrict the use of USDC in DeFi, liquidity could decrease, trading volume could decline, and token valuations could come under pressure.
Ultimately, the CLARITY Act may not only regulate cryptocurrencies, but it could also reshape the entire DeFi ecosystem. Beneficiaries could include compliant infrastructure providers like Circle, exchanges, and custodians (like BitGo), while those harmed would be tokens associated with permissionless finance and fee withdrawals. In this context, any unregulated token that behaves like equity in financial protocols like Uniswap would face structural downside risks under this framework.
Is Circle still a worthwhile investment?
According to the latest discussions, the proposed CLARITY bill would prohibit platforms from directly or indirectly offering yields to stablecoin holders, particularly those similar to bank deposit yields. This restriction would broadly apply to digital asset service providers, including exchanges, brokers, and their affiliates, and specifically target any structure "economically or functionally equivalent to" interest.
While the bill allows activity-based rewards, such as loyalty programs, promotions, or subscription plans, these rewards cannot be linked to balances or transaction volume in any way to mimic interest income. In effect, this significantly restricts how incentives can be structured and clearly defines a boundary: stablecoins cannot function as interest-bearing deposit accounts.
Circle appears to be a structural winner, while Coinbase faces structural headwinds, with BitGo falling somewhere in between. BitGo's market capitalization has declined from approximately $2 billion to $2.5 billion at its IPO to around $1.14 billion, but this makes its valuation more attractive. Based on its 12-month earnings of approximately $57 million, the company has a P/E ratio of 20, which is not expensive for a regulated crypto infrastructure provider with a strong institutional investor base.
BitGo vs. Circle – BitGo's stock price plummeted 50% after its IPO.
However, profitability remains a key constraint. Its reported revenue is inflated due to the influence of total transaction volume, while its actual profit margin is very low (net profit margin is less than 1%). This makes BitGo's structure closer to a low-margin custody and execution platform than a high-margin balance sheet model like Circle or Tether.
Therefore, although BitGo's valuation has become more reasonable after the decline, and its asymmetry has improved with limited downside, it remains a low-beta infrastructure company rather than a candidate for valuation reassessment. In contrast, Circle still presents a stronger investment opportunity, and changes in regulatory policies could significantly alter its profit margins and valuation.
Tether's hiring of a top-tier (Big Four) auditor marks a significant step forward in its institutional credibility, demonstrating improved transparency, governance, and preparedness to operate under stricter financial regulatory frameworks. While this doesn't guarantee a successful IPO, it clearly lowers one of the key hurdles to achieving listing and could foreshadow a future listing if the regulatory environment becomes more favorable.
This move will have a direct impact on Circle: increased competition from a more institutionalized Tether may compress Circle's relative valuation premium, but it will also validate the overall effectiveness of the stablecoin model and potentially expand its potential market size. In this sense, a more transparent and institutionally aligned Tether will both challenge Circle's market position and reinforce the broader argument that stablecoins are a core financial infrastructure.
Even after the CLARITY Act, Circle is unlikely to reach Tether's profit margins, but the gap could narrow significantly. Tether's higher profit margins are due to its retention of almost all reserve proceeds, fewer regulatory restrictions, and extremely low revenue sharing. Even under the CLARITY framework, which restricts the transfer of proceeds, Circle will still face higher compliance costs, stricter reserve requirements, and the potential continuation (albeit renegotiated) of revenue sharing with distribution partners like Coinbase.
The CLARITY bill would clearly improve Circle's profit margins. If revenue cannot be transferred to users, the issuer will gain more financial benefit, and Circle's bargaining power in renegotiations will be enhanced. Combined with scale and institutional user adoption, this could drive a significant increase in profit margins, gradually rising from the current teens to over 20%.
If USDC continues to grow at a similar pace, Circle's valuation is reasonable. Over the past 18 months, USDC's circulating supply has increased by approximately $46 billion, reaching $79 billion, indicating high adoption rates. As a settlement and liquidity layer, Circle currently generates approximately $3.2 billion in gross revenue based on a 4% reserve yield, with net revenue of approximately $2 billion to $2.3 billion after deducting revenue sharing and costs.
If USDC expands to $120 billion to $150 billion, gross revenue could increase to $4.8 billion to $6 billion; if profit margins rise to 20% to 25%, net revenue could reach $1 billion to $1.4 billion. Using a price-to-earnings ratio of 25 to 30, its valuation range would be approximately $25 billion to $42 billion, higher than its current market capitalization of approximately $24.5 billion.
However, this valuation framework is highly dependent on the continued growth of USDC. Recent data shows that USDC supply growth has begun to stagnate, indicating that the market has begun to anticipate its growth rate will accelerate again. Therefore, investing in Circle is no longer simply a valuation reassessment driven by regulatory benefits, but increasingly relies on growth; both the continued expansion of USDC and improvements in economic efficiency need to be achieved to support the current share price level.
The base price target for USDC over the next 12 months is $120, with the potential to rise to $150 if USDC growth accelerates again and profit margins improve significantly; however, if growth stagnates and the current economic situation persists, there is a risk of a decline to $80.
Summarize
The CLARITY Act accelerated the transition of stablecoins to regulated products, especially when combined with developments such as the GENIUS ETF framework and Treasury-backed structures. The end result is a shift of stablecoin reserves towards regulated money market products. This dynamic is structurally beneficial for infrastructure players like Circle, but detrimental to yield-dependent DeFi tokens and protocols.
Prior to the Clarity Act (if passed), stablecoins were a hybrid instrument, serving as both a payment tool and a yield generator, as well as a core collateral for DeFi. Under the proposed framework, this model undergoes a fundamental shift: stablecoins are defined solely as payment instruments, with yields limited to regulated products.
This has resulted in a significant redistribution of value. Potential winners include Circle, Treasury-backed ETF structures, and custodians or other compliant financial infrastructure; on the other hand, Coinbase's monetization flexibility has decreased, while DeFi yield protocols and "earn" products face structural headwinds.
In effect, the Office of the Comptroller of the Currency (OCC) not only restricted yields but also redefined who can obtain them. The result is a shift in economic value from cryptocurrency-native channels (Coinbase and DeFi) to regulated financial infrastructure.
The main beneficiaries of the CLARITY Act are likely to be Circle, MKR, and BitGo . While BitGo's profit margins remain low, its post-IPO drop of approximately 50% makes its valuation more attractive. On the other hand, Coinbase and a range of DeFi protocols, including 1inch, Aave, COMP, dYdX, Sushi, and Uniswap, are structurally disadvantaged. To some extent, the market has already begun to digest these changes, and the CLARITY Act is less of a new catalyst and more of a reinforcement of existing trends.
Year-to-date performance of major DeFi cryptocurrencies – winners and losers
