New Clarity Act Text Allows Crypto Firms to Offer Stablecoin Rewards with Certain Conditions

A recently released agreement clarifies that stablecoin issuers are not allowed to offer yield solely based on holding stablecoin reserves, as this may undermine the role of traditional banks in the economy. However, the new text permits 'bona fide' transactions and activities-based rewards, which are comparable to those offered by financial institutions for credit card usage. The proposed Digital Asset Market Clarity Act aims to regulate the crypto market, and the latest development brings the legislation one step closer to advancing in the Senate. The agreement between U.S. Senators Thom Tillis and Angela Alsobrooks would ban stablecoin issuers from providing yield that mirrors deposit interest, but it allows them to structure rewards programs that do not rival banks' core products. The text also includes provisions for rulemaking, which would provide further guidance on how crypto firms can offer yield products. According to experts, this may require digital asset companies to restructure their yield offerings, shifting from a 'buy and hold' approach to a 'buy and use' model. The Consumer Federation of America's director of investor protection, Corey Frayer, noted that the rulemaking provision could give regulators flexibility in defining what crypto companies can do with yield products. The language of the provision allows regulators to consider factors such as balance, duration, and tenure in rewards calculation, as well as the definition of the activity and the use of incentive programs. The text also includes anti-evasion language to prevent crypto firms from circumventing the regulations. The development is seen as a positive step towards resolving the issues surrounding stablecoin yield, and it is expected to drive consumer utility, competition, and innovation in the digital asset ecosystem.