New Clarity Act Text Allows Crypto Firms to Offer Stablecoin Rewards with Certain Conditions

A recent agreement has been reached regarding the contentious aspect of cryptocurrency market structure legislation, which will prohibit stablecoin yield under certain conditions. The new section of the proposed Digital Asset Market Clarity Act text, released on Friday, outlines that the compromise between U.S. Senators Thom Tillis and Angela Alsobrooks would ban stablecoin issuers from offering yield based solely on holding stablecoin reserves. This move is seen as a way to protect traditional banking institutions, which provide essential financial services to the American economy. The text does, however, allow for rewards tied to real participation on crypto platforms and networks, which is a significant development for companies like Coinbase. The CEO of Coinbase, Brian Armstrong, expressed satisfaction with the agreement, stating that it preserves activity-based rewards. The new text includes specific language that restricts the payment of interest on yield to restricted recipients, unless it is based on bona fide activities or transactions. This approach is similar to what financial firms offer on credit card activity. The restriction does apply to loyalty programs or similar efforts, and digital asset firms may need to restructure how they offer yield. 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 provide further clarity on how crypto firms can offer yield. The wording of the rulemaking provision could give regulators flexibility in defining what crypto companies can do with yield products. The text also includes anti-evasion language to prevent companies from finding ways to circumvent the rules. Overall, the new text is seen as a step forward in resolving the issues surrounding stablecoin yield and is expected to move the legislation forward.