New Regulations Allow Crypto Firms to Offer Stablecoin Rewards with Certain Conditions

A newly proposed section of the Digital Asset Market Clarity Act, released on Friday, indicates that stablecoin issuers will be prohibited from offering yield solely based on holding stablecoin reserves. However, the legislation does allow for 'bona fide' transactions and activities to be rewarded, similar to incentives offered by financial institutions for credit card usage. The compromise, reached by U.S. Senators Thom Tillis and Angela Alsobrooks, aims to strike a balance between regulating the crypto market and allowing for innovation. The new text also includes provisions for rulemaking, which will be overseen by the Treasury Department and the Commodity Futures Trading Commission, and will provide clearer guidelines on how crypto firms can offer yield products. According to Coinbase's chief legal officer, Paul Grewal, the language 'preserves activity-based rewards tied to real participation on crypto platforms and networks,' and the company is satisfied that this language should not be the basis of any objection. The legislation is expected to move forward, with a Senate Banking Committee hearing potentially advancing the bill. The crypto industry has been closely watching the developments, with some companies already considering how to restructure their yield offerings to comply with the new regulations. While the exact implications of the rulemaking provisions are still unclear, experts believe that regulators will have latitude in defining what crypto companies can do with yield products, and that the wording of the rulemaking section could allow crypto firms to conduct activities and then pay returns back to customers.