Meanwhile, Circle’s chief rival said that it was working on a full audit with an unnamed Big Four accounting firm. Tether’s notice fueled speculation that the company could be gearing up for a U.S. expansion for its market-leading USDT stablecoin, potentially pressuring Circle’s business, according to analysts at Clear Street.
“In our view, the move is overdone,” the group led by Owen Lau wrote in a Wednesday note, in reference to Circle’s subsequent fall. “Near-term monetization expectations may need to be tempered, but the strategic demand case for USDC remains intact.”
Clear Street analysts reiterated a price target of $152 and “Buy” rating for Circle, arguing that company tailwinds remain unaffected. That includes tokenization, AI-native payments, prediction markets, and the institutional adoption of regulated payment rails, they wrote.
The analysts pointed out that the Office of the Comptroller of the Currency, America’s top banking regulator, has already proposed rules that prohibit stablecoins from offering interest-like payments for holding or using a stablecoin.
“In other words, a pure pass-through yield model was already under pressure before [yesterday’s] Clarity headlines,” they added.
For Circle, positioning its product as a more compliant alternative to Tether’s USDT has been paramount. Even if the El Salvador-based firm improves its audit standards, “it is difficult to see investors ranking USDT above USDC on regulatory grounds,” the analysts wrote.
As far as Circle’s relationship with Coinbase goes, where the exchange earns income generated by U.S. Treasuries backing USDC, Bernstein analysts posited on Wednesday that some investors are getting their wires crossed.
“Circle does not pay yield to USDC holders,” they wrote. “The yield ban restricts platforms distributing yield to end-users, not issuers (Circle) earning on reserves.”
Bernstein analysts reiterated “Outperform” ratings for Circle and Coinbase, alongside respective price targets of $190 and $440. They echoed the notion that restrictions on yield are unlikely to slow USDC’s pace of adoption among institutions or crypto-native users.
Coinbase CEO Brian Armstrong has said that a ban on deposit-like rewards for stablecoins would actually make Coinbase more profitable, because the company passes along the bulk of revenue that it receives from USDC reserves to the exchange’s users.
Still, Coinbase’s stock price has slipped around 10% on the week to $181. Bernstein analysts predicted that Coinbase would likely explore a workaround on any stablecoin restrictions and “go through a period of transition to the new rewards model.”
