New Clarity Act Text Permits Crypto Companies to Offer Stablecoin Rewards Under Certain Conditions

The newly unveiled section of the proposed Digital Asset Market Clarity Act, released on Friday, outlines a compromise between US Senators Thom Tillis and Angela Alsobrooks, which would ban stablecoin issuers from providing yield based solely on holding stablecoin reserves, citing the importance of depository institutions in the US economy. However, the text does allow for rewards tied to legitimate activities and transactions, similar to those offered by financial institutions for credit card usage. This development is expected to pave the way for a Senate Banking Committee hearing, marking a significant step forward in the legislation's progress. The language of the text has been welcomed by crypto companies, including Coinbase, whose CEO Brian Armstrong expressed support for the agreement, stating that it preserves activity-based rewards. The company's chief legal officer, Paul Grewal, noted that the language should not pose an obstacle to the bill's passage. The restriction on yield products does not apply to incentives based on genuine activities or transactions, but does apply to loyalty programs. According to an individual at a crypto company, this would require digital asset firms to restructure their yield offerings, shifting from a 'buy and hold' system to a 'buy and use' approach. The rulemaking provisions in the text grant regulators latitude in defining how crypto companies can offer yield products, with factors such as balance, duration, and tenure to be considered in rewards calculations. The text also includes anti-evasion language, and Senators Alsobrooks and Tillis have been negotiating the details of the text for several months, with input from bank lobbyists and crypto insiders. The agreement has been welcomed by trade associations, including the Digital Chamber, which sees it as an important step towards resolving one of the final issues standing in the way of the Committee's markup.