New Clarity Act Text Allows Crypto Firms to Offer Stablecoin Rewards with Certain Conditions

A newly proposed section of the Digital Asset Market Clarity Act, released on Friday, outlines that stablecoin issuers will be prohibited from offering yield solely based on holding stablecoin reserves. This approach is similar to discussions that have taken place throughout the year. The compromise, reached by U.S. Senators Thom Tillis and Angela Alsobrooks, aims to prevent stablecoin issuers from providing services that could undermine traditional depository institutions. The text allows for rewards tied to real participation on crypto platforms and networks, which is in line with what the banking lobby has requested. However, it restricts incentives that are economically or functionally equivalent to interest-bearing bank deposits. The legislation is expected to move forward, with a Senate Banking Committee hearing potentially taking place soon. Coinbase CEO Brian Armstrong and chief legal officer Paul Grewal have expressed satisfaction with the language, stating that it preserves activity-based rewards and should not be a basis for objection. The text also includes provisions for rulemaking, which will be directed by the Treasury Department and the Commodity Futures Trading Commission. This will provide further clarity on how crypto firms can offer yield products in the future. The language of the rulemaking provision may give regulators flexibility in defining what crypto companies can do with yield products, according to Corey Frayer, director of investor protection at the Consumer Federation of America. The text also includes anti-evasion language to prevent companies from circumventing the regulations. Overall, the new text marks a significant step forward in the legislation, and its impact on the crypto industry will be closely watched.