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

A recently introduced provision in the proposed Digital Asset Market Clarity Act restricts stablecoin issuers from offering yield solely based on holding stablecoin reserves, aiming to protect traditional banking institutions. The compromise, reached by U.S. Senators Thom Tillis and Angela Alsobrooks, bans stablecoin yield that mimics deposit interest but allows rewards tied to actual participation on crypto platforms. This development is expected to pave the way for a Senate Banking Committee hearing, bringing the legislation one step closer to advancing through the Senate. The text of the agreement explicitly states that no covered party can pay interest on yield to a restricted recipient solely for holding payment stablecoins or in a manner equivalent to interest-bearing bank deposits. However, incentives based on genuine activities or transactions are exempt from this restriction. The legislation also includes provisions for regulators to define the rules for crypto firms offering yield products, allowing for flexibility in how these products are structured and rewarded. Industry leaders, including Coinbase CEO Brian Armstrong and Digital Chamber CEO Cody Carbone, have expressed satisfaction with the compromise, seeing it as a crucial step towards resolving outstanding issues and driving innovation in the digital asset ecosystem.