Yesterday there was a third White House meeting to address the issue of stablecoin yield. The draft Clarity Act for crypto includes a clause preventing yield in an effort to reduce deposit flight from banks. This and other issues caused Coinbase to pull support for the bill; the crypto exchange currently offers 3.5% on USDC balances. According to reports, in the latest meeting the White House proposed wording allowing rewards only linked to transactions, not deposits. We previously published a deep dive into winners and losers from stablecoin yield.
Patrick Witt, Executive Director of the President’s Council of Advisors for Digital Assets, outlined draft text that would allow rewards for “activities or transactions (not balances)” according to Semafor’s Eleanor Mueller. Witt’s latest step should not come as a shock. In an interview with Yahoo Finance last week, he said, “We’ve heard from Senators from both sides of the aisle (re) concerns about deposit flight from stablecoins on different platforms. So what we’ve encouraged both sides to do is let’s find a middle ground,” referring to balance-based yield as “idle yield”.
Apparently US banking groups are discussing the specific wording with a view to signing off. Below we reviewed the legal wording in major jurisdictions. Most allow rewards, just not something resembling interest. However, in some cases the international wording could potentially block more sophisticated transactions that traditional finance may want to engage with.
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