New Legislation Allows Crypto Firms to Offer Stablecoin Rewards with Certain Conditions

A recent agreement has been reached regarding the contentious issue of stablecoin yields in the crypto market structure legislation. The newly released text of the Digital Asset Market Clarity Act reveals that a compromise has been struck, banning stablecoin issuers from offering yield solely based on holding stablecoin reserves. This move is seen as a way to protect traditional banking institutions, which provide essential financial services to the US economy. However, the legislation does allow for rewards tied to real participation on crypto platforms and networks, which is a significant concession to the crypto industry. The text reads, 'No covered party shall, directly or indirectly, pay any form of interest on yield... solely in connection with the holding of such restricted recipient's payment stablecoins.' This restriction does not apply to incentives based on genuine activities or transactions that differ from yield generated by interest-bearing bank deposits. The legislation is expected to undergo a Senate Banking Committee hearing, which could pave the way for its progression through the Senate. The crypto industry has largely welcomed the compromise, with Coinbase CEO Brian Armstrong expressing his support for the move. The company's chief legal officer, Paul Grewal, noted that the language 'preserves activity-based rewards tied to real participation on crypto platforms and networks,' which is a positive development for the industry. The new text also includes provisions for rulemaking, which will be overseen by the Treasury Department and the Commodity Futures Trading Commission. This will provide clarity on how crypto firms can offer yield products in the future. Overall, the legislation marks a significant step forward in the regulation of the crypto industry, and its impact will be closely watched by industry stakeholders.