Summary
The CLARITY Act's stablecoin yield provisions have become the most contentious issue in the bill's path to passage. The current draft bars interest or yield "solely in connection with the holding" of payment stablecoins but permits "activity-based or transaction-based rewards." Banking groups argue this creates a loophole that could enable stablecoins to function like bank deposits, pulling funds from the banking system and reducing credit availability.
Key Points
- Current draft language: Bars compensation paid "solely in connection with the holding" of payment stablecoins
- Permitted: Activity-based or transaction-based rewards (cash back, merchant incentives, transaction rebates)
- Banking coalition: ABA, ICBA, 76 state banking associations — framing as deposit defense
- Core concern: If customers can earn rewards on stablecoins, banks lose funding base for mortgages, small-business loans
- Tillis-Alsobrooks compromise: Improved language distinguishing holding vs. activity, but banks say loopholes remain
- State regulators: Conference of State Bank Supervisors urges limits on federal preemption of state money transmission regulation
- ICBA ad campaign: Opposing what it calls preferential regulatory treatment for crypto companies
- Community bank impact: Most exposed to deposit outflows; less diversified funding than large banks
- Deferred rulemaking: SEC, CFTC, Treasury to help define boundary between yield and rewards
- Market impact: If rule stays broad → established issuers with distribution win; if rule tightens → banks gain