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

A newly proposed agreement has been reached regarding the contentious issue of stablecoin yields in the crypto market structure legislation, with a revised approach that has been discussed since the beginning of the year. The latest version of the Digital Asset Market Clarity Act text, released on Friday, reveals that a compromise has been reached between U.S. Senators Thom Tillis and Angela Alsobrooks, which would ban stablecoin issuers from offering yields based solely on holding stablecoin reserves, as this may undermine the financial services provided by depository institutions. However, the new text does allow for rewards tied to real participation on crypto platforms and networks, as long as these rewards are not economically or functionally equivalent to interest-bearing bank deposits. This means that crypto firms can still offer incentives for users who engage in genuine transactions, similar to rewards offered by financial firms for credit card activity. The restriction does not apply to loyalty programs or other efforts that are not based on interest-bearing deposits. The language of the text is seen as a positive development by crypto companies, including Coinbase, whose CEO Brian Armstrong and chief legal officer Paul Grewal have expressed satisfaction with the compromise. The new text also includes provisions for rulemaking by the Treasury Department and Commodity Futures Trading Commission, which will provide further clarity on how crypto firms can offer yield products. Overall, the revised text is seen as a step forward in the legislation's progress through the Senate, although there are still other negotiation points that need to be resolved.