New Legislation Allows Crypto Firms to Offer Stablecoin Rewards with Certain Conditions

A newly proposed agreement regarding stablecoin yield in the crypto market has been released, which would ban stablecoin issuers from offering yield solely based on holding stablecoin reserves, but allows for rewards tied to real participation on crypto platforms. The new section of the proposed Digital Asset Market Clarity Act text, released on Friday, revealed a compromise between U.S. Senators that would prohibit stablecoin issuers from offering yield based on just holding stablecoin reserves, as it may inhibit depository institutions. However, the text maintains that incentives based on bona fide activities or transactions, such as those similar to rewards offered on credit card activity, are permitted. The restriction does not apply to loyalty programs or similar efforts. The language of the new text is seen as a step forward in the legislation's progress, with a Senate Banking Committee hearing potentially advancing the bill. Coinbase CEO Brian Armstrong and chief legal officer Paul Grewal have expressed satisfaction with the language, stating that it preserves activity-based rewards tied to real participation on crypto platforms. The text also includes anti-evasion language and directs the Treasury Department and Commodity Futures Trading Commission to launch a rulemaking within a year of the bill becoming law, which will lay out more clearly how and when crypto firms can offer yield. The rulemaking provision may give regulators flexibility in defining what crypto companies can do with yield products, and may allow them to consider balance, duration, and tenure as factors in rewards calculation.