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

Under a newly proposed agreement, stablecoin yields would be banned, with a new section of the Digital Asset Market Clarity Act text revealing that a compromise would prevent stablecoin issuers from offering yields based solely on holding stablecoin reserves. The proposed legislation aims to protect traditional banking institutions, which provide essential financial services to the US economy, by preventing stablecoin issuers from offering similar services that may hinder these institutions. The agreement is the result of negotiations between US Senators Thom Tillis and Angela Alsobrooks, and is expected to pave the way for a Senate Banking Committee hearing to advance the legislation. The new text allows for rewards tied to real participation on crypto platforms and networks, but prohibits loyalty programs or similar efforts. Crypto firms may need to restructure their yield offerings to comply with the new rules, which are expected to be clarified through a rulemaking process involving the Treasury Department and the Commodity Futures Trading Commission. The proposed legislation has been welcomed by the Digital Chamber, a trade association that represents the digital asset industry, which sees the release of the stablecoin yield language as an important step towards resolving one of the final issues standing in the way of the Committee's markup.