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

A recently unveiled agreement aims to regulate the contentious aspect of stablecoin yield in the crypto market, introducing a provision that restricts stablecoin issuers from offering yield solely based on holding stablecoin reserves. This approach is similar to discussions that have been ongoing since the start of the year. The new text, part of the proposed Digital Asset Market Clarity Act, was released by U.S. Senators Thom Tillis and Angela Alsobrooks, and is expected to pave the way for a Senate Banking Committee hearing. The compromise would ban stablecoin issuers from offering yield that mirrors traditional bank deposit interest, but would allow for rewards tied to real participation on crypto platforms. According to the text, 'no covered party shall, directly or indirectly, pay any form of interest on yield... solely in connection with the holding of such restricted recipient's payment stablecoins.' However, incentives based on 'bona fide activities or bona fide transactions' would be permitted, similar to rewards offered by financial firms for credit card activity. The restriction would apply to loyalty programs or similar efforts. Crypto companies may need to restructure their yield offerings to comply with the new regulations, shifting from a 'buy and hold' system to a 'buy and use' approach. The rulemaking provisions in the text would require 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 give regulators flexibility in defining what crypto companies can do with yield products, and may allow them to conduct activities and pay returns to customers. The text also includes anti-evasion language to prevent companies from circumventing the regulations. The release of the stablecoin yield language is seen as a significant step towards resolving one of the final issues standing in the way of the Committee's markup, and is expected to drive consumer utility, competition, and innovation across the digital asset ecosystem.