Clarity Act text lets crypto firms offer stablecoin rewards while shielding bank yield

Stablecoin yield would be prohibited under the newly released agreement between U.S. Senators Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.) addressing that contentious part of the crypto market structure legislation in a compromise that's broadly similar to what's been discussed since the start of the year.

The text released Friday would ban stablecoin issuers from offering yield based on just holding stablecoin reserves, saying that "depository institutions provide financial services that are integral to the strength of the American economy," and stablecoin issuers offering similar services "may inhibit" these institutions.

"No covered party shall, directly or indirectly, pay any form of interest on yield (whether in cash, tokens, or other consideration) to a restricted recipient — (A) solely in connection with the holding of such restricted recipient's payment stablecoins; or (B) on a payment stablecoin balance in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit," the text said.

This restriction does not apply to incentives "based on bona fide activities or bona fide transactions" that are different from yield generated by interest-bearing bank deposits, the text said, maintaining an approach to rewards that's similar to what financial firms offer on credit card activity. The restriction does apply to loyalty programs or similar efforts.

Senators Alsobrooks and Tillis have been negotiating on the text for the last few months, after a Senate Banking Committee markup on the overall Clarity Act was postponed last-minute in January. In March, they presented an agreement that blocked crypto firms from offering yield that looked like deposit interest but did allow them to structure rewards programs that didn't rival banks' core products.

In a statement, Digital Chamber CEO Cody Carbone said the trade association "welcomes the public release of stablecoin yield language as an important step toward resolving one of the final issues standing between the Committee and a markup. We are encouraged to see this process moving forward and will continue advocating for the power of rewards to drive consumer utility, competition, and innovation across the digital asset ecosystem."

Carbone also called for a committee markup.