A new agreement unveiled under the proposed Digital Asset Market Clarity Act has sparked significant discussion in the crypto industry, particularly regarding stablecoin yield regulations. This comprehensive deal, reached by U.S. Senators Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.), aims to prohibit stablecoin issuers from offering yield based solely on holding stablecoin reserves. The legislation argues that services offered by depository institutions are vital to the U.S. economy and that stablecoin issuers providing similar offerings could hinder these financial institutions.
The agreement fosters optimism about advancing the bill through the Senate Banking Committee, with potential hearings on the horizon. However, several negotiation topics remain unresolved. Coinbase CEO Brian Armstrong expressed support on social media for the legislation’s progression, stating, “Mark it up.” With Coinbase heavily involved in the negotiations, the company’s risk concerning yield restrictions is a pressing issue. Coinbase’s chief legal officer, Paul Grewal, noted that the new language facilitates activity-based rewards linked to genuine engagement on crypto platforms, addressing concerns raised by banking lobbyists.
The legislation specifies that no entity regulated under the act can directly or indirectly offer interest or yield to recipients solely for holding payment stablecoins. However, it does allow for rewards related to genuine activities, distancing these from traditional interest-bearing account structures. This stipulation means that loyalty programs and similar efforts are prohibited in this context. According to insights from an anonymous crypto source, this may necessitate a shift in how crypto companies provide yield, pivoting from a “buy and hold” approach to one that promotes active engagement, labeled as “buy and use.”
Uncertainties persist about implementing these changes effectively, especially in light of the rulemaking provisions that task the Treasury Department and the Commodity Futures Trading Commission with defining the appropriate framework for yield offerings within a year of the legislation’s enactment. Corey Frayer, director of investor protection at the Consumer Federation of America, noted that the broad language could empower regulators to permit firms to conduct yield-generating activities while managing customer returns.
Factors such as balance, duration, and the nature of activities involved will be weighed in determining reward calculations. Notably, anti-evasion measures have been incorporated to ensure compliance. Senators Tillis and Alsobrooks have engaged in discussions over the past months regarding this regulatory framework after earlier setbacks delayed the Senate Banking Committee’s markup.
In view of ongoing negotiations among banking lobbyists and crypto stakeholders, the lawmakers previously indicated in March that they had found common ground to restrict yield offerings that mimic bank deposit interest while allowing for the development of rewards programs that do not directly compete with traditional banking services.
The Digital Chamber’s CEO, Cody Carbone, welcomed the public disclosure of the stablecoin yield regulations, highlighting this step as critical in addressing the outstanding issues preventing the Banking Committee from proceeding with a markup. He expressed optimism about the legislative process and the potential for rewards to enhance consumer utility and drive competition within the digital asset sector.
