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

A newly proposed agreement related to the crypto market structure legislation has been released, outlining provisions for stablecoin yield. The agreement, similar to discussions held earlier in the year, would prohibit stablecoin issuers from offering yield solely based on holding stablecoin reserves. This decision is part of the Digital Asset Market Clarity Act text released by U.S. Senators Thom Tillis and Angela Alsobrooks, which aims to prevent stablecoin issuers from providing services that could undermine traditional depository institutions. The new text allows for rewards tied to real participation on crypto platforms, which aligns with the bank lobby's requests. The legislation includes restrictions on paying interest on yield to restricted recipients, unless the rewards are based on bona fide activities or transactions. This approach is comparable to rewards offered by financial firms for credit card activity. However, the restriction applies to loyalty programs and similar efforts. The text also includes provisions for rulemaking, which would require 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. The rulemaking provision could provide regulators with flexibility in defining what crypto companies can do with yield products, including considering factors such as balance, duration, and tenure in rewards calculations. The legislation has been welcomed by trade associations, with the Digital Chamber CEO stating that the public release of stablecoin yield language is an important step towards resolving issues and advancing the legislation. Crypto companies, including Coinbase, have expressed satisfaction with the language, which they believe preserves activity-based rewards and promotes innovation in the digital asset ecosystem.