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

A newly introduced section of the proposed Digital Asset Market Clarity Act, released on Friday, outlines a compromise between US Senators Thom Tillis and Angela Alsobrooks, which would prohibit stablecoin issuers from offering yield solely based on holding stablecoin reserves. This approach aims to preserve the integral role of depository institutions in the American economy, while allowing for rewards tied to real participation on crypto platforms and networks. The legislation would ban the payment of interest on yield to restricted recipients solely for holding payment stablecoins or in a manner equivalent to interest-bearing bank deposits. However, it permits incentives based on bona fide activities or transactions, similar to rewards offered by financial firms for credit card activity. The new text also includes provisions for rulemaking, directing the Treasury Department and Commodity Futures Trading Commission to establish clear guidelines for crypto firms offering yield within a year of the bill becoming law. This rulemaking provision may provide regulators with flexibility in defining the parameters for yield products, considering factors such as balance, duration, and tenure in rewards calculations. The language of the legislation has been welcomed by industry leaders, including Coinbase CEO Brian Armstrong, who expressed satisfaction that the language preserves activity-based rewards and does not object to the bill. The Digital Chamber CEO, Cody Carbone, also praised the release of the stablecoin yield language as an important step towards resolving key issues and advancing the legislation.