New Legislation Allows Crypto Companies to Offer Stablecoin Rewards with Certain Conditions

A recent agreement on the Digital Asset Market Clarity Act has introduced a new provision that restricts stablecoin issuers from offering yield solely based on holding stablecoin reserves. This move aims to prevent stablecoin issuers from competing with traditional banks. However, the legislation does allow for rewards tied to real participation on crypto platforms and networks. The new text states that no covered party can pay interest on yield to a restricted recipient solely for holding payment stablecoins or in a manner equivalent to interest-bearing bank deposits. Nevertheless, incentives based on bona fide activities or transactions are permitted, similar to rewards offered by financial firms for credit card activity. The legislation also requires 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 flexibility in defining what crypto companies can do with yield products, considering factors such as balance, duration, and tenure in rewards calculation. The text includes anti-evasion language and is the result of months of negotiations between Senators Thom Tillis and Angela Alsobrooks. The compromise is seen as a crucial step forward in the legislation's progress, with trade associations and industry leaders welcoming the public release of the stablecoin yield language.