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

The latest draft of the Digital Asset Market Clarity Act, unveiled on Friday, outlines a compromise that bans stablecoin issuers from providing yield solely based on holding stablecoin reserves. The proposed legislation aims to prevent stablecoin issuers from offering services that could undermine the role of traditional depository institutions in the US economy. Instead, it allows for rewards tied to actual participation and usage on crypto platforms and networks. The text of the agreement specifies 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 bona fide activities or transactions are exempt from this restriction. The legislation also includes provisions for regulators to establish clear rules on crypto yield products within a year of the bill becoming law. Industry insiders believe this will require digital asset firms to restructure their yield offerings, shifting from a 'buy and hold' model to a 'buy and use' approach. The rulemaking provisions in the text grant regulators flexibility in defining what crypto companies can do with yield products, potentially allowing them to conduct activities and pay returns to customers. The language also considers factors such as balance, duration, and tenure in rewards calculations. The release of the stablecoin yield language is seen as a significant step forward in the legislative process, with trade associations and industry leaders welcoming the development and advocating for the importance of rewards in driving consumer utility, competition, and innovation in the digital asset ecosystem.