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

A newly unveiled section of the proposed Digital Asset Market Clarity Act, released on Friday, outlines that stablecoin issuers will be prohibited from offering yield solely based on holding stablecoin reserves. This approach is similar to what has been discussed throughout the year. The compromise, reached by U.S. Senators Thom Tillis and Angela Alsobrooks, aims to prevent stablecoin issuers from providing services that may hinder the operations of traditional depository institutions, which are deemed essential to the American economy. The new text allows for rewards tied to real participation on crypto platforms and networks, which is in line with the bank lobby's requirements. According to Coinbase's chief legal officer, Paul Grewal, this language preserves activity-based rewards and should not pose any objections. The restriction does not apply to incentives based on genuine activities or transactions that differ from interest-bearing bank deposits. However, it does apply to loyalty programs or similar efforts. The rulemaking provisions in the text direct the Treasury Department and Commodity Futures Trading Commission to launch a rulemaking within a year of the bill becoming law, which will provide clearer guidelines on how crypto firms can offer yield. The wording of the rulemaking provision may give regulators flexibility in defining what crypto companies can do with yield products. The text also includes anti-evasion language to prevent crypto firms from circumventing the rules. The release of the stablecoin yield language is seen as a crucial step towards resolving one of the final issues standing in the way of the Committee's markup. The Digital Chamber CEO, Cody Carbone, welcomed the public release of the language, stating that it is an important step towards resolving the issue and driving consumer utility, competition, and innovation in the digital asset ecosystem.