New Clarity Act Text Allows Crypto Firms to Offer Stablecoin Rewards While Protecting Bank Yields

Under the recently announced agreement between US Senators Thom Tillis and Angela Alsobrooks, stablecoin yield offerings will be prohibited, as part of a broader compromise on crypto market structure legislation. The new text, released on Friday, blocks stablecoin issuers from providing yield based solely on holding stablecoin reserves, citing the importance of depository institutions to the US economy and the potential for stablecoin issuers to undermine these institutions. However, the text does allow for incentives based on legitimate activities or transactions, similar to rewards offered by financial firms for credit card usage. This approach enables crypto firms to structure rewards programs that do not compete with banks' core products, such as loyalty programs. The restriction applies to yield generated by interest-bearing bank deposits, but not to rewards based on genuine transactions or activities. Senators Alsobrooks and Tillis have been negotiating the text for several months, after a Senate Banking Committee markup was postponed in January. In March, they presented an agreement that prohibited crypto firms from offering yield resembling deposit interest, while allowing them to develop rewards programs that do not rival banks' core offerings. The Digital Chamber's CEO, Cody Carbone, welcomed the public release of the stablecoin yield language, calling it an important step towards resolving one of the final issues blocking the Committee's markup. Carbone also emphasized the importance of rewards in driving consumer utility, competition, and innovation across the digital asset ecosystem, and urged the Committee to move forward with the markup.