New US Bill Could Ban Stablecoin Yields, Reshaping DeFi and Banking
A new US bill could reshape the stablecoin market by banning yield on digital assets like USDC and USDT. The CLARITY Act, still under debate, aims to restrict stablecoins to payments only. If passed, the law would mark a major shift for decentralised finance (DeFi) and traditional banking alike.
Over the past three years, Circle's USDC has surged in dominance, narrowing the gap with Tether's USDT. By early 2026, USDC's market cap reached over 81 billion USD—double its size in 2023—while its adjusted transaction volume (2.2 trillion USD) outpaced Tether's in 2026 so far. The CLARITY Act proposes strict limits on stablecoins, preventing them from offering interest or investment returns. Instead, they would function purely as payment tools. The bill remains in early legislative stages, with stablecoin regulations at the centre of discussions.
If approved, the ban on yield would redirect capital from DeFi platforms to traditional finance. Banks and money market funds could see increased deposits, while DeFi protocols like Uniswap, Aave, and Compound might face stricter rules on distributing value to users. This shift could shrink trading volumes, reduce liquidity, and lower demand for DeFi tokens.
USDC's growth has been driven by stronger institutional adoption and regulatory clarity in the US and EU. Its expansion across multiple blockchains—including Solana and Base—also fuelled a 72% rise in circulation and a 247% jump in on-chain volume during 2025. Meanwhile, Tether's growth slowed, reinforcing USDC's position as the preferred choice for institutions.
Circle, the issuer of USDC, stands to gain from the proposed law. Its compliance-focused approach aligns with the bill's aims, potentially consolidating its market lead. Paxos, which issues USDP, remains a minor player with little impact on the broader market. The CLARITY Act could redefine how stablecoins operate, pushing yield-generating activities back into traditional finance. USDC's recent expansion—backed by institutional trust and multi-chain reach—positions it well under stricter rules. The outcome of the legislative process will determine whether DeFi platforms adapt or face a decline in activity.
