New Legislation Allows Crypto Firms to Offer Rewards on Stablecoins While Protecting Bank Yields

A newly introduced section of the proposed Digital Asset Market Clarity Act, released on Friday, outlines that stablecoin yield will be prohibited under the agreement. This approach is similar to discussions held throughout the year. The compromise, negotiated by U.S. Senators Thom Tillis and Angela Alsobrooks, aims to ban stablecoin issuers from offering yield based solely on holding stablecoin reserves, as it may hinder the financial services provided by depository institutions. The new text allows for rewards tied to real participation on crypto platforms and networks, which is in line with the bank lobby's requirements. However, it restricts incentives that are economically or functionally equivalent to interest-bearing bank deposits. The legislation includes provisions for rulemaking, directing the Treasury Department and Commodity Futures Trading Commission to establish clearer guidelines for crypto firms offering yield within a year of the bill becoming law. This may provide regulators with flexibility in defining what crypto companies can do with yield products. The text also includes anti-evasion language, ensuring that crypto firms cannot circumvent the regulations. The release of the stablecoin yield language is seen as an important step towards resolving one of the final issues standing in the way of the Committee's markup. The Digital Chamber trade association has welcomed the public release of the language, advocating for the power of rewards to drive consumer utility, competition, and innovation across the digital asset ecosystem.