Key Points
The Clarity Act isn't quite dead yet, but it sure isn't looking very healthy.
The proposed law would have knocked down one form of competition for Circle.
A significant legislative defeat negatively affected cryptocurrencies and cryptocurrency stocks alike on Tuesday. One of the latter that really took it on the chin was top stablecoin developer Circle Internet Group (NYSE: CRCL). The company's stock wasn't a top pick for most investors, as it plummeted more than 11% that trading session.
A bill withers
Crypto insiders and investors were hoping for the Senate to pass the Clarity Act, as the proposed law would have established which regulatory bodies were responsible for policing different kinds of digital currencies and other assets. The act was passed in a vote in the House of Representatives last year.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
The outcome was different in the upper chamber of Congress. Senators voted 50-49 to block the bill's advancement.
While that's not necessarily the final curtain for the bill -- which would have required at least a 60-vote majority in favor of procedural advancement -- it's unlikely to succeed after the midterm elections (as many political forecasters project Democrats will take control of at least the House).
Compared with other crypto stocks and cryptocurrencies, Circle's stock fell more sharply on Tuesday. That's likely because one provision of the act would have prohibited paying interest on stablecoins held by investors. Several companies and developers currently remunerate stablecoin holders in this way, while Circle does not; the law's passage would have leveled the playing field for Circle.
Moving on from defeat
While this is an almost indisputable defeat for Circle -- not to mention hundreds of other businesses -- I don't think it'll have a detrimental, long-term effect on the company.
It's still in a very strong position as the developer of one of the most popular stablecoins on the scene, USDC, and does very well by earning interest on the reserves backing the coin -- which will rise if the Federal Reserve (Fed) hikes rates, as expected. Crypto bulls who believe in the future of stablecoins might consider Tuesday's double-digit share price slump as a buying opportunity.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.