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

A newly proposed section of the Digital Asset Market Clarity Act, released on Friday, reveals that crypto firms will be barred from offering yield on stablecoins that is solely based on holding reserves. However, the legislation does allow for rewards tied to real participation on crypto platforms and networks. This compromise, reached by U.S. Senators Thom Tillis and Angela Alsobrooks, aims to prevent stablecoin issuers from offering services that may undermine the role of traditional banks in the economy. The new text states that 'no covered party shall, directly or indirectly, pay any form of interest on yield' to users solely for holding payment stablecoins, unless it is based on 'bona fide activities or bona fide transactions'. This approach is similar to the rewards offered by financial firms on credit card activity. The legislation also includes provisions for regulators to define the rules for crypto firms offering yield products, with considerations for factors such as balance, duration, and tenure. The rulemaking process is expected to provide clarity on how crypto companies can structure their yield offerings, with the goal of promoting consumer utility, competition, and innovation in the digital asset ecosystem.