Stablecoin yields would be prohibited under the recently released agreement between U.S. Senators Thom Tillis (R.N.C.) and Angela Alsobrooks (D-Md.) that addresses that contentious portion of the cryptocurrency market structure legislation in a compromise that is very similar to what has been discussed since the beginning of the year.
The language released Friday would prohibit stablecoin issuers from offering returns based simply on holding stablecoin reserves, saying that “depository institutions provide financial services that are integral to the strength of the U.S. economy,” and stablecoin issuers that offer similar services “may inhibit” these institutions.
“No covered party shall pay, directly or indirectly, any interest on yield (whether in cash, tokens or other consideration) to a restricted recipient – (A) solely in connection with the holding of such restricted recipient’s payment stablecoins; or (B) on a payment stablecoin balance in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit,” the text said.
This restriction does not apply to incentives “based on bona fide activities or transactions” that are different from the return generated by interest-bearing bank deposits, the text said, maintaining a rewards approach similar to what financial companies offer on credit card activity. The restriction applies to loyalty programs or similar efforts.
Senators Alsobrooks and Tillis have been negotiating the language for the past few months, after a Senate Banking Committee review of the overall Clarity Act was postponed at the last minute in January. In March, they introduced a deal that prevented cryptocurrency companies from offering returns that resembled deposit interest, but allowed them to structure rewards programs that did not rival banks’ core products.
In a statement, Digital Chamber CEO Cody Carbone said the trade association “welcomes the public release of stablecoin performance language as an important step toward resolving one of the last issues standing between the Committee and a profit margin. We are encouraged to see this process moving forward and will continue to advocate for the power of rewards to drive consumer utility, competition, and innovation across the digital asset ecosystem.”
Carbone also asked for a markup from the committee.
