The CLARITY Act Could Stop Platforms That Act Like Banks

Crypto platforms may no longer be able to offer rewards like stablecoin interest, but activity-based incentives remain under the new legislative draft.

Crypto advocates and banking representatives reconvened on Capitol Hill this week to review the latest legislative document that spells out an agreement between the two groups after months of negotiations.

The meeting continues previous discussions about whether the startup should be allowed to offer its customers rewards from their stablecoin holdings.

Proposed Rules Would Allow Work Awards

Crypto journalist Eleanor Terrett shared the details of the session via social media, stating that the latest proposal will expressly prevent crypto platforms from offering stablecoin rewards to their customers, whether ‘directly or indirectly,’ or in any form such as a bank deposit.

According to sources cited by Terrett, the restriction will result in an industry-wide ban that applies to all digital goods service providers and affiliates. This measure would close any potential loopholes in the proposed law and prevent these platforms from entering into anything ‘economically or functionally’ like interest-earning stablecoin offerings.

On the other hand, the new rules will allow performance-based rewards linked to user engagement under the condition that they are not considered interest. This will include activities such as loyalty, promotion, and subscription programs.

Additionally, the new guidelines require regulators such as the US Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the US Treasury to jointly define what qualifies as permitted rewards and establish other rules to enforce them.

Industry Response

In his X post, the crypto journalist shared the feedback he had received from industry participants who had reviewed the draft document.

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One person pointed out how the content of the new proposal differs from what the White House discussed in previous meetings. According to them, the level of ‘economic equality’ is also vague and may give regulators room to interpret it strictly.

The source also raised concerns about how some provisions could limit how rewards are tied to balances or transaction volumes. Crypto platforms, as a result, will have a hard time coming up with incentive structures. Overall, they pointed out that the new proposal is narrow and limited.

However, one industry player believes that the draft is more in line with expectations and offers a fair compromise. They also explained that it still allows transaction-based rewards while preventing stablecoins from acting as interest-bearing deposit accounts.

Terrett’s source also believes the update represents the best possible outcome under the circumstances. This is because the previous version, the Tillis-Alsobrooks proposal, would have set more restrictive guidelines. Meanwhile, he also revealed that the bank’s representatives will consider the document this week.