New Legislation Allows Crypto Firms 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. This agreement bans stablecoin issuers from providing yield solely based on holding stablecoin reserves, as it may hinder the financial services offered by depository institutions. However, it allows for rewards tied to real participation on crypto platforms and networks, such as activity-based incentives. The text explicitly 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 genuine activities or transactions are permitted, similar to those offered by financial firms for credit card activity. This distinction may require digital asset firms to restructure their yield offerings, shifting from a 'buy and hold' approach to a 'buy and use' model. The rulemaking provisions in the text grant the Treasury Department and Commodity Futures Trading Commission the authority to establish clearer guidelines for crypto firms to offer yield within a year of the bill becoming law. This could provide regulators with flexibility in defining what crypto companies can do with yield products, potentially allowing them to conduct activities and pay returns to customers based on factors like balance, duration, and tenure. The text also includes anti-evasion language to prevent crypto firms from circumventing the regulations. The release of this stablecoin yield language is seen as a significant step towards resolving one of the final issues holding up the Committee's markup, with trade associations like the Digital Chamber welcoming the development and advocating for the power of rewards to drive consumer utility, competition, and innovation in the digital asset ecosystem.