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

A newly proposed agreement aims to regulate the contentious aspect of stablecoin yields in the crypto market structure legislation, with an approach similar to previous discussions. The new section of the proposed Digital Asset Market Clarity Act, released on Friday, reveals a compromise between U.S. Senators Thom Tillis and Angela Alsobrooks. This compromise would prohibit stablecoin issuers from offering yield based solely on holding stablecoin reserves, as it may hinder the financial services provided by depository institutions. The agreement allows for rewards tied to real participation on crypto platforms and networks, similar to what the bank lobby had requested. Incentives based on 'bona fide activities or bona fide transactions' are permitted, but loyalty programs and similar efforts are restricted. The text also includes anti-evasion language and directs the Treasury Department and Commodity Futures Trading Commission to launch a rulemaking within a year of the bill becoming law, which will provide clearer guidelines for crypto firms offering yield products. The rulemaking provision may give regulators latitude in defining what crypto companies can do with yield products, and the wording allows for consideration of balance, duration, and tenure as factors in rewards calculation.