On Friday a deal was reached on the wording of the stablecoin yield and rewards clause for the Clarity Act, as first reported by Punchbowl News, with Senators Tillis and Alsobrooks leading the negotiations. Like every good compromise, there are elements of the wording that both sides will dislike.
The win for the banking lobby is a repeated acknowledgment in multiple clauses that anything resembling a bank deposit is not allowed. Specifically, anything that is economically or functionally equivalent to the payment of interest or yield on an interest bearing bank deposit. Even the section title shifted, from ‘Preserving Rewards for Stablecoin Holders’ in January to ‘Prohibiting Interest and Yield on Payment Stablecoins’.
By contrast, the exceptions allowing crypto firms to offer rewards are considerably broader than they first appear. In January’s iteration of the rewards clause, there was a general safe harbor for (non yield bearing) rewards, without specificity. The latest iteration includes three groups of exceptions, which allow payments based on balances, not just stablecoin transaction volumes. This includes providing liquidity for market making, posting collateral for trading and staking. We explore this in more depth, and why these exceptions may be the reason Coinbase is willing to accept these changes. On Friday Coinbase CEO Brian Armstrong posted on X that the bill should proceed to markup, a notable shift given Coinbase was the one that blocked it in January.
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