Stablecoin shake-up: Tether admits audit issues, Circle is revalued by the market

Writing by: Haotian

Tether is conducting an audit, and Circle ($CRCL) has plummeted, but after months of delays, the CLARITY Act has finally made substantial progress.

It seems all three events point to one truth: the original crypto-native forces backing stablecoins have officially compromised with the traditional finance bankers behind the scenes. Why do I say that?

1. Tether’s move to undergo an audit is very surprising. Paolo Ardoino has always been tough, and Tether has thrived for years under regulatory pressure despite being opaque and unaudited, maintaining its position as the global leader.

Now, proactively seeking audits from the Big Four is likely because they sensed the CLARITY Act is about to be enacted. They don’t want to be downgraded to gray assets and kicked out of the game, so they had to concede.

2. As for Circle ($CRCL)’s sharp decline, honestly, it’s quite baffling. I don’t believe it’s due to Tether’s compliance efforts threatening its dominance. As the most regulated-friendly stablecoin, the CLARITY Act should have been a highlight for it, but instead, it fell.

The reason is that the clause allowing passive interest for stablecoin holders has strangled the main driver behind USDC’s growth. Without this, why would users move their money from banks to USDC? This is a structural issue in Circle’s business model that the market is re-pricing.

3. Regarding the CLARITY Act’s “bottleneck” after months of deadlock, a compromise has suddenly been reached: activity rewards can be given, but earning passively is not allowed. It looks like both sides retreated a bit, but in reality, the bankers behind the scenes have won big.

The bankers’ opposition to the bill was simple: they worry that with deposit interest at 0.1% and stablecoins earning 4-5% on-chain, once this interest rate gap is legalized, $6.6 trillion in retail deposits will eventually move on-chain. But the compromise removed this risk.

But here’s the question: what exactly are activity rewards, and what are the rules? These are still vague areas. This is definitely bad news for centralized exchanges (CEXs), but could it be temporarily positive for DeFi? Because in the past, exchanges used stablecoin yield farming and flexible deposits as main user retention tools. Now, with the passive interest framework restricted, compliance pressures will directly impact them.

Conversely, DeFi might find loopholes because “activity-based rewards” are inherently DeFi’s turf—providing liquidity, participating in governance, executing trades are all on-chain activities. Framing these as “activity rewards” is much easier than for CEXs.