What happened: Cryptocurrency-related stocks rallied on Monday, with shares of Circle Internet Group (CRCL) and Coinbase Global (COIN) rising 15% and 5%, respectively.
What’s behind the measure: Investors are digesting the long-awaited language on stablecoin performance that has delayed the key cryptocurrency industry bill in Congress.
Coinbase and Circle share a long-term commercial distribution agreement around the world’s second-largest stablecoin, USDC, and for years have relied on interest payments as a crucial growth driver.
The new language, first reported by PunchBowl News, means that platforms like Coinbase will not be able to pay customers for the return on their dormant stablecoin balances. However, the new language still allows payment of rewards for stablecoins that are used in good faith transactions. It also allows liquidity and market creation activities, as well as the publication of collateral linked to a transaction or loan.
What else do you need to know? The result may give customers more incentives to use stablecoins for more daily purchases, TD Cowen analyst Jaret Seiberg wrote in a Monday note, which “could disintermediate banks from consumer finance.” For the same reason, Seiberg is still not convinced that the revised rule will stand, noting that banks would be an obstacle to its enactment.
Since earlier this year, the debate over stablecoin performance payments has been the biggest obstacle to passing a major crypto market structure bill known as the Clarity Act. However, it is not the only issue that remains unresolved in the legislation.
With the publication of this latest revised legislative text, the next step is for the Senate Banking Committee to schedule a review hearing on the bill in the coming days and time is running out.
Seiberg estimates that the Senate must approve the bill by the end of July, meaning that after taking into account the holidays, the Senate Banking Committee has only “a few weeks” left to bring the bill to the floor.
David Hollerith covers the financial sector, ranging from the country’s largest banks to regional lenders, private equity firms and the cryptocurrency space.
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