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

A newly proposed agreement aims to regulate stablecoin yield, prohibiting it under certain conditions, as part of the broader Digital Asset Market Clarity Act. Released on Friday, the text outlines a compromise between U.S. Senators Thom Tillis and Angela Alsobrooks, banning stablecoin issuers from offering yield solely based on holding stablecoin reserves. This move is seen as a crucial step forward in the legislation's progress through the Senate. The new text allows for rewards tied to real participation on crypto platforms, similar to incentives offered by financial firms on credit card activity. However, it restricts loyalty programs and requires digital asset firms to restructure their yield offerings from a 'buy and hold' to a 'buy and use' system. The rulemaking provisions in the text grant regulators latitude in defining how crypto companies can offer yield products, considering factors such as balance, duration, and tenure in rewards calculations. The legislation also includes anti-evasion language, aiming to prevent crypto firms from circumventing the regulations. With this development, the path is cleared for a Senate Banking Committee hearing, marking a significant step towards advancing the legislation.