In a closed-door meeting at Parliament House, crypto industry leaders reviewed the latest text of the long-awaited Cryptocurrency Market Structure Bill, which highlights key proposals to address disputes over stablecoin yields and rewards.
Latest CLARITY Act Draft Says No to Stablecoin Yields
On Monday, the crypto industry debuted the latest version of the crypto market structure bill, known as the CLARITY Act, which addresses key issues that have stalled legislation over the past two months.
Industry insiders shared details of the latest legal documents with journalist Eleanor Tellet. The proposal would prohibit platforms from directly or indirectly offering yield on stablecoin holdings or in a manner similar to bank deposits, according to an insider email shared with Terret.
In particular, this restriction broadly applies to digital asset service providers and their affiliates, including exchanges and brokers. The proposal aims to limit workarounds and prohibit activities that are “economically or functionally equivalent” to concessions, and addresses concerns from the banking industry.
It is noteworthy that the Cryptocurrency Market Structure Bill has stalled since the Senate Banking Committee released its draft in mid-January. The document contained several divisive policies, including significant restrictions on DeFi and interest payments on stablecoins.
The yield dispute has become a major sticking point between the banking and crypto industries, leading to lengthy negotiations. Banks have criticized the landmark stablecoin legislation, the GENIUS Act, for loopholes that could put the financial system at risk and distort market dynamics.
Prior to its draft in January, banks pressed lawmakers to include language in the CLARITY Act that would prohibit yielding on stablecoins not only by issuers but also by crypto exchanges, brokers, and related entities.
To address this issue, the Senate Banking Committee proposed prohibiting issuers from paying interest to passive token holders while offering rewards for certain actions such as account opening and cashback. A month ago, the White House held a meeting for negotiations between the two sides.
As reported by Bitcoinist, Patrick Witt, executive director of the US President’s Advisory Council on Digital Assets, has reportedly submitted a draft proposal that would make earning yield from idle balances in stablecoins “effectively off the table,” narrowing the discussion to whether crypto companies can offer rewards tied to specific activities.
Terret’s report shared that the latest proposal would allow rewards based on user activity, such as loyalty, promotions, and subscription programs, if they cannot be considered the equivalent of interest from an economic or functional perspective.
Additionally, the latest version of the CLAIRTY Act requires the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Treasury Department to work together to define acceptable compensation and establish anti-avoidance regulations within one year.
Compensation violations have a variety of reactions.
The language has received mixed reactions from the cryptocurrency industry, with some calling the language more “restrictive.” One cryptocurrency industry leader who reviewed the document told Tellet that the draft “is a ‘deviation’ from what was previously discussed with the White House.”
Anonymous sources reportedly warned that the “economic equivalence” standard for stablecoin rewards is ambiguous and risks being subject to more restrictive interpretations by future regulators. Additionally, they highlighted potential challenges in structuring incentives due to limitations in tying rewards to balances or transaction amounts. “Overall, this is a narrower and more restrictive approach to cryptocurrencies,” they said.
On the contrary, another anonymous industry leader believes the text is “mostly in line with expectations.” They told the Tele that the draft reflects a “balanced outcome” that maintains transaction-based incentives while making clear that stablecoins cannot function like interest-bearing savings accounts.
They reportedly declared that “this is the best possible outcome” and concluded that the text was “broader than the original Tillis-Alsobrooks proposal, which would have been more restrictive with respect to cryptocurrencies.” Bank representatives will now consider the draft at a similar meeting on Tuesday.
On the 1-week chart, the market capitalization of cryptocurrencies reaches $2.4 trillion. Source: TOTAL on TradingView
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