Stablecoin Yield Ban in Clarity Act Draft Raises Crypto Industry Concerns
WASHINGTON — Crypto industry representatives left a closed-door meeting on Capitol Hill Monday with concerns that proposed language in the Digital Asset Market Clarity Act regarding stablecoin yield was too restrictive, according to a person familiar with the discussions.
The revised bill, spearheaded by Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD), would prohibit yield payments earned simply by holding a stablecoin, a move intended to address concerns from traditional banks that such rewards could siphon deposits. The agreement in principle between the senators and the White House, first reported by Politico on Friday, aims to resolve a key sticking point in the broader effort to establish a comprehensive regulatory framework for digital assets.
The person familiar with the draft expressed uncertainty about how the legislation would define and permit “activity-based” rewards, which are intended to allow yield through uses like payments and transfers. The mechanics of determining what qualifies as an allowable activity remain unclear, they said.
The compromise represents a significant attempt to bridge the divide between the crypto industry and the banking sector, which have been locked in a lobbying battle over the future of stablecoin regulation. Banks have argued that interest-bearing stablecoins pose a competitive threat and could destabilize the financial system, while crypto firms contend that yield is essential for innovation in decentralized finance (DeFi). According to a report by Politico, Senator Alsobrooks stated the deal is designed to “protect innovation” while preventing bank deposit flight.
The Clarity Act is considered a crucial piece of legislation for the crypto industry, which has long sought regulatory clarity in the United States. A similar version of the bill passed the House of Representatives last year, and another cleared a markup hearing in the Senate Agriculture Committee. Passage by the Senate Banking Committee would be a major step toward a final, combined version for a full Senate vote.
The stablecoin yield debate has been a major obstacle to progress on the Clarity Act. However, other issues remain unresolved, including oversight of the DeFi space and a provision sought by Democrats to prevent senior government officials from profiting from the crypto industry, reportedly aimed at former President Donald Trump.
The industry recently achieved a partial victory with the passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, the first major U.S. Law to govern a segment of the crypto industry. However, industry insiders view the Clarity Act as the more comprehensive and critical step toward full integration into the U.S. Financial system, potentially unlocking investment from institutional investors and developers. According to a report from Disruption Banking, the stablecoin market currently sits at $316 billion.
Senator Tillis has indicated he intends to review the final text with industry stakeholders before formalizing the agreement. White House crypto policy adviser Patrick Witt lauded the agreement as a milestone, while acknowledging further work remains on other unresolved issues.