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

A newly released agreement has clarified the rules for stablecoin yield in the crypto market, prohibiting issuers from offering yield solely based on holding stablecoin reserves. The compromise, reached by U.S. Senators Thom Tillis and Angela Alsobrooks, aims to prevent stablecoin issuers from providing services that could rival those of traditional banks. However, the text does allow for rewards tied to real participation on crypto platforms and networks, as well as incentives based on bona fide activities or transactions. This approach is similar to the rewards offered by financial firms for credit card activity. The restriction does not apply to loyalty programs or similar efforts, but does require digital asset firms to restructure how they offer yield, shifting from a 'buy and hold' system to a 'buy and use' model. The rulemaking provisions in the text grant regulators latitude in defining what crypto companies can do with yield products, and the wording allows for consideration of factors such as balance, duration, and tenure in rewards calculation. The text also includes anti-evasion language, and its release is seen as a significant step forward in advancing the legislation. 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 Digital Chamber CEO, Cody Carbone, has also welcomed the public release of the stablecoin yield language, seeing it as an important step toward resolving one of the final issues standing in the way of a markup.