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

A newly introduced agreement addresses the contentious issue of stablecoin yields in the crypto market, adopting an approach similar to previous discussions. The proposed Digital Asset Market Clarity Act, released on Friday, reveals that US Senators Thom Tillis and Angela Alsobrooks have reached a compromise. This compromise would ban stablecoin issuers from offering yield solely based 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, which aligns with the bank lobby's demands. 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 imminent. Coinbase CEO Brian Armstrong and chief legal officer Paul Grewal have expressed satisfaction with the language, stating it preserves activity-based rewards. The text also includes provisions for rulemaking, directing the Treasury Department and Commodity Futures Trading Commission to clarify how crypto firms can offer yield within a year of the bill becoming law. This may give regulators flexibility in defining yield products and rewards calculation. The Consumer Federation of America's director of investor protection, Corey Frayer, noted that the rulemaking provision could allow crypto firms to conduct activities and pay returns to customers. The legislation includes anti-evasion language and has been welcomed by the Digital Chamber CEO, Cody Carbone, as a step towards resolving issues and driving innovation in the digital asset ecosystem.