In a closed-door meeting on Capitol Hill, crypto industry leaders reviewed the latest draft of the long-awaited crypto market structure bill, focusing on key proposals to address stablecoin yield and rewards controversy.
Latest CLARITY Act Draft Says No to Stablecoin Yield
On Monday, the crypto industry got a first look at the latest version of the crypto market structure bill, known as the CLARITY Act, which addresses the main issue that has stalled the law for the past two months.
Industry sources shared details of the latest legislation with reporter Eleanor Terret. According to an internal stakeholder email shared with Terret, the proposal would prohibit platforms from offering yield, directly or indirectly, by holding a stablecoin, or in a manner similar to a bank deposit.
Notably, this restriction will apply broadly to digital asset service providers, including exchanges and consumers, and affiliates. The proposal aims to limit remedies and prohibit any activity that is “economically or functionally equivalent” to interest, addressing concerns on the part of the banking industry.
It is worth noting that the crypto market structure bill has been on hold since the Senate Banking Committee published its draft in mid-January. The document included several divisive policies, including significant restrictions on DeFi and interest payments on stablecoins.
The yield dispute became a major sticking point between the banking and crypto industries, leading to a lengthy negotiation period. The banking side criticized the landmark stablecoin law, the GENIUS Act, for loopholes that could endanger the financial system and distort market forces.
Ahead of the January draft, banks pressured lawmakers to include language in the CLARITY Act that prohibits yields on stablecoins from crypto exchanges, brokers, and related organizations, rather than just withdrawals.
To address this issue, the Senate Banking Committee suggested that issuers offer rewards for certain actions, such as opening accounts and refunds, but be denied interest payments to inactive token holders. Last month, the White House held a meeting to negotiate between the two sides.
As reported by Bitcoinist, Patrick Witt, the managing director of the US Council of Presidential Advisors on Digital Assets, is reported to have submitted a draft document that left the yield on passive stablecoin balances “effectively off the table,” reducing the argument that crypto firms can offer rewards linked to specific activities.
Terret’s report shared that the latest proposal would allow rewards based on user activity, including loyalty, promotions, or subscription programs, if they are not considered equivalent to interest from an economic or operational point of view.
Additionally, the latest version of the CLAIRTY Act will require the Securities and Exchange Commission (SEC), the Futures Trading Commission (CFTC), and the Treasury Department to work together to define acceptable awards and establish anti-avoidance rules within a year.
Rewards Compromise Sees Mixed Reactions
The document received mixed reactions from the crypto industry, with some calling the language “restrictive.” One crypto industry leader who reviewed the document told Terret that the draft is “a departure” from what was previously discussed with the White House.”
An unnamed source reportedly warned that the “economic equity” standard for stablecoin rewards is unclear, risking a more restrictive interpretation by future regulators. In addition, they highlighted potential challenges in rewards planning due to rewards pooling restrictions on balances or transaction amounts. “Overall, this is a narrow and restrictive approach to understanding crypto,” they said.
In contrast, one unnamed industry leader opined that the text is “very much in line with expectations.” They told Terret that the draft reflects a “balanced outcome” that maintains transaction-based incentives while making it clear that stablecoins cannot function as interest-bearing deposit accounts.
“This is a very good result,” they reportedly confirmed, concluding that the text “is more comprehensive than Tillis-Alsobrooks’ original proposal, which would have severely restricted crypto.” Bank representatives will review the draft at the same meeting on Tuesday.
The total crypto market capitalization is at $2.4 trillion in the one-week chart. Source: TOTAL on TradingView
Featured image from Unsplash.com, Chart from TradingView.com
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