In yesterday's White House meeting regarding the Clarity Act, banks and banking-related institutions prepared a written statement on the principles of prohibiting earnings and interest related to stablecoins, as well as the potential impact on Circle: 1. Introduction In the "GENIUS Act," Congress explicitly designed payment stablecoins as payment tools. In line with this design, market structure legislation should incorporate the following "prohibition of earnings and interest principles" to limit deposit outflows, as deposit outflows reduce the availability of credit for the community. 2. Key Points 1. Key Point One: Prohibition of Earnings on Stablecoins (1) Prohibition on providing earnings to stablecoin holders: No one may provide any form of financial or non-financial consideration to holders of payment stablecoins, as long as that consideration is related to the purchase, use, ownership, possession, custody, holding, or retention of payment stablecoins. (2) Any proposed exemptions to this prohibition must be extremely limited in scope to avoid undermining the prohibition itself and must not promote "deposit outflows" that would weaken Main Street's lending capacity. 2. Key Point Two: Enforcement (1) Regulatory agencies should enforce the relevant provisions of this prohibition and have the authority to impose civil penalties. 3. Key Point Three: Anti-Evasion (1) No one may evade or avoid this prohibition, and regulatory agencies may establish relevant rules. 4. Key Point Four: Statements and Disclosures (1) No one may market, promote, or describe any financial or non-financial consideration related to payment stablecoins, and such consideration must not be stated or implied as any of the following: (2) The "earnings" of the payment stablecoin are related to its purchase, use, ownership, possession, custody, holding, or retention. (3) The consideration is equivalent to a deposit. (4) The consideration is insured by the FDIC or NCUA. (5) The consideration is paid by the issuer of the payment stablecoin. (6) The consideration can be compared to the interest on deposited funds. (7) The consideration is risk-free. (8) The consideration is paid by a third party other than the actual payer. (9) Regulatory agencies should establish rules to ensure accurate disclosure of the above statements. 5. Key Point Five: Research and Rulemaking (1) Two years after the bill takes effect, regulatory agencies should submit a research report on payment stablecoin activities to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services. (2) The research should include: financial or non-financial considerations paid to holders of payment stablecoins, and the impact of such considerations on the following aspects: deposits in custodial institutions, payment system efficiency, and credit availability. (3) If necessary, regulatory agencies should propose corresponding regulatory rules regarding any significant risks identified in the research. 3. What Impact Does This Have on Circle? 1. Minimal Harm to USDC Product Definition The terms of USDC are clearly stated: USDC itself does not generate interest or returns, and holders are not entitled to any interest or other earnings generated by reserves. This statement naturally aligns with the regulatory direction of "prohibiting interest payments." 2. Constraints on Circle's Partners in "Retail Acquisition/Retention Subsidies" If Circle's partners want to stimulate retail holding through methods like "cashback, points, airdrops," the anti-evasion and disclosure provisions of the rules will make such strategies more likely to trigger regulatory risks and compliance costs. Regulators treat "third-party reward programs" as equivalent to interest payments, leading to a significant contraction in incentive strategies for exchange wallet card projects, which may suppress the growth rate of USDC in the retail sector in the short term. This has the greatest impact on Coinbase, as providing USDC rewards to Coinbase One members is a key part of Coinbase's product strategy flywheel, and they are unlikely to yield easily. 3. Potential Impact on Circle's Revenue Sharing Agreement with Coinbase If Coinbase is prohibited from directly providing interest rewards to USDC holders, does Coinbase still need to take so much revenue? 4. Avoiding "Price War" Risks, Returning to True Competitive Advantages of Stablecoins Prohibiting interest payments will weaken the stablecoin expansion model of "attracting deposits and balances with high yields," avoiding a subsidized price war and bringing competition for stablecoins back to compliance, safety, liquidity, networks, and distribution. (Binance's 20% deposit USD1 activity may not be feasible in the future). This is more favorable for Circle, which focuses on "compliance licenses and institutional channels," as it excels in compliance and institutional collaboration rather than high-yield subsidies. 5. Circle's Business Model is Relatively Stable When issuers are prohibited from returning earnings to holders, the interest generated by reserves is more likely to remain within the issuer's economic model, and the industry is more likely to form a balance of "issuers taking the interest spread, users seeking convenience and safety." 6. Resistance from Banks and Political Risks Will Decrease Banks are most afraid of "yield-bearing stablecoins" directly siphoning off low-interest deposits, and prohibiting interest payments effectively weakens the most sensitive points of conflict. This will increase the likelihood of USDC being accepted in traditional financial scenarios, such as payment institutions, merchant acquiring, and negotiations related to clearing.