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

A newly introduced provision in the Digital Asset Market Clarity Act aims to regulate stablecoin yields, prohibiting issuers from offering returns based solely on holding stablecoin reserves. This move is expected to pave the way for a Senate Banking Committee hearing, advancing the legislation further. The compromise, reached by U.S. Senators Thom Tillis and Angela Alsobrooks, bans stablecoin issuers from providing yield based on merely holding stablecoin reserves, as this may hinder the services provided by depository institutions. However, it allows for rewards tied to real participation on crypto platforms and networks, similar to those offered by financial firms for credit card activity. The new text states that no covered party shall pay interest on yield to a restricted recipient solely for holding payment stablecoins or in a manner equivalent to interest-bearing bank deposits. This restriction does not apply to incentives based on genuine activities or transactions, but does apply to loyalty programs. The legislation directs the Treasury Department and Commodity Futures Trading Commission to launch a rulemaking process within a year of the bill becoming law, which will clarify how crypto firms can offer yield. The rulemaking provision may give regulators flexibility in defining what crypto companies can do with yield products, and the wording allows them to consider balance, duration, and tenure as factors in rewards calculation. The text also includes anti-evasion language, and Senators Alsobrooks and Tillis have been negotiating the details of the text for months. The Digital Chamber CEO welcomes the public release of the stablecoin yield language as an important step toward resolving one of the final issues standing between the Committee and a markup. Coinbase executives have expressed satisfaction with the language, stating that it preserves activity-based rewards tied to real participation on crypto platforms and networks.