New Clarity Act Text Allows Crypto Firms to Offer Rewards on Stablecoins While Protecting Bank Yields

A newly proposed section of the Digital Asset Market Clarity Act text, released on Friday, reveals that a compromise has been reached to ban stablecoin issuers from offering yield solely based on holding stablecoin reserves. The text asserts that depository institutions are crucial to the US economy and that stablecoin issuers offering similar services may hinder these institutions. This development is likely to pave the way for a Senate Banking Committee hearing to advance the legislation. The agreed-upon language preserves rewards tied to real participation on crypto platforms and networks, which is in line with what the bank lobby desired. According to the text, 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. However, incentives based on genuine activities or transactions are allowed, similar to rewards offered by financial firms for credit card activity. This restriction applies to loyalty programs and similar efforts. The rulemaking provisions in the text direct the Treasury Department and Commodity Futures Trading Commission to launch a rulemaking within a year of the bill becoming law, which will clarify how and when crypto firms can offer yield. The wording of the rulemaking provision may give regulators flexibility in defining what crypto companies can do with yield products. The text also includes anti-evasion language. After months of negotiation, Senators Alsobrooks and Tillis have reached an agreement that blocks crypto firms from offering yield similar to deposit interest but allows them to structure rewards programs that don't rival banks' core products. The Digital Chamber trade association has welcomed the public release of the stablecoin yield language as a crucial step toward resolving one of the final issues standing between the Committee and a markup.