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

A newly proposed section of the Digital Asset Market Clarity Act, released on Friday, outlines a compromise that would prohibit stablecoin issuers from offering yield solely based on holding stablecoin reserves. This approach is similar to discussions that have taken place throughout the year. The proposed legislation aims to prevent stablecoin issuers from providing services that could rival those of traditional banks, which are deemed essential to the US economy. Instead, it allows for rewards tied to real participation and activity on crypto platforms, similar to incentives offered by financial institutions for credit card usage. The text of the legislation specifies that no covered party can pay interest or yield to a restricted recipient solely for holding payment stablecoins or in a manner equivalent to interest-bearing bank deposits. However, it does permit incentives based on bona fide activities or transactions, which could include loyalty programs or other reward schemes. The legislation also includes provisions for rulemaking, directing the Treasury Department and Commodity Futures Trading Commission to establish clearer guidelines for crypto firms offering yield products within a year of the bill becoming law. This could provide regulators with flexibility in defining what constitutes permissible yield products. The move is seen as a step forward in the legislation's progress, with Coinbase CEO Brian Armstrong expressing support for the agreement, stating that it preserves activity-based rewards and does not object to the language. The Digital Chamber, a trade association, also welcomed the public release of the stablecoin yield language, viewing it as a crucial step toward resolving outstanding issues and advancing the legislation.