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- U.S. lawmakers aim to ban passive yield on stablecoins to protect traditional banking.
- Activity-based crypto rewards will remain allowed under the proposal.
- The CLARITY Act could force major changes in how crypto platforms design products.
Momentum is building in Washington as Thom Tillis unveils new legislative language on stablecoin yields, offering a clearer picture of how U.S. lawmakers may regulate crypto incentives. The proposal, developed alongside Angela Alsobrooks, could mark a key step toward advancing the long-anticipated Digital Asset Market Clarity Act, also known as the CLARITY Act.
New Rules Draw a Line on Stablecoin Yield
At the core of the proposal is a firm restriction: stablecoin issuers would be barred from offering passive yield simply for holding tokens. The draft specifies that companies cannot provide interest-like returns tied to wallet balances, whether paid in cash, tokens, or other forms of compensation.
Lawmakers argue this approach is designed to protect traditional banking institutions, which remain central to the U.S. financial system. By preventing stablecoins from mimicking deposit accounts, the bill aims to avoid destabilizing competition between crypto firms and banks.
Activity-Based Rewards Still Allowed
Despite the restrictions, the proposal does not impose a blanket ban on incentives. Instead, it creates a distinction between passive earnings and rewards tied to genuine user activity. Incentives linked to transactions, network participation, or platform engagement would remain permissible.
This carveout opens the door to models similar to credit card rewards or loyalty programs. It also signals that lawmakers are willing to support innovation—provided it is tied to real economic activity rather than passive accumulation.
Regulators would be tasked with refining these definitions after the bill’s passage, with a one-year timeline to establish clear rules. These guidelines are expected to address factors such as user behavior, holding periods, and the nature of transactions.
The crypto industry has responded with cautious optimism. Brian Armstrong publicly urged lawmakers to move forward, reflecting growing pressure for regulatory clarity. Meanwhile, Paul Grewal emphasized that the framework preserves incentives tied to meaningful participation on blockchain networks.
For companies, the implications are significant. Firms may need to redesign products away from passive yield models and toward more interactive ecosystems. The inclusion of anti-evasion provisions also suggests regulators are preparing for attempts to bypass the rules.
What Comes Next for the CLARITY Act?
While the proposal represents progress, the CLARITY Act still faces political hurdles, particularly among Senate Republicans. However, Senator Tillis has indicated plans to push for a committee markup once Congress returns from its May recess.
Also Read: CLARITY Act Update: Republicans Race to Secure Final Votes Before Deadline
If advanced, the legislation could reshape how stablecoins operate in the U.S., setting a precedent for balancing innovation with financial stability.
The newly released stablecoin yield language offers a pragmatic compromise—restricting passive income features while preserving activity-based rewards. As lawmakers edge closer to formal debate, the crypto industry may soon gain the regulatory clarity it has long sought, albeit with new rules that redefine how digital assets generate value.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
