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The text released Friday blocks crypto firms from offering stablecoin yield offerings that look like bank deposits, but "bona fide" transactions are allowed.
Coming to an agreement means there's likely nothing in the way of a Senate Banking Committee hearing (known as a markup) that could finally advance the legislation another key step in its progress through the Senate, though there are a number of other negotiation points that haven't been publicly resolved.
Mark it up," Coinbase CEO Brian Armstrong wrote in a posting on social media site X. His company had been at the center of the talks and potentially had the most to lose from restrictions on stablecoin rewards.
Coinbase's chief legal officer, Paul Grewal, said in a separate post that this language "preserves activity-based rewards tied to real participation on crypto platforms and networks, which is what the bank lobby said they wanted," adding that "we’re focused on getting a bill done and are satisifed that this language should not be the basis of any objection."
In its legalese, the new text reads, "No covered party shall, directly or indirectly, pay any form of 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."
This restriction does not apply to incentives "based on bona fide activities or bona fide transactions" that are different from yield generated by interest-bearing bank deposits, the text said, maintaining an approach to rewards that's similar to what financial firms offer on credit card activity. The restriction does apply to loyalty programs or similar efforts.
One individual at a crypto company said this would require digital asset firms to restructure how they offer yield, moving from a "buy and hold" system to "buy and use" to meet the transaction caveats in the text.
It's difficult to say how exactly this might work, the person said, pointing to the rulemaking provisions in the text, which direct the Treasury Department and Commodity Futures Trading Commission to launch a rulemaking within a year of the bill becoming law that lays out more clearly how and when crypto firms can offer yield.
The way the rulemaking provision is worded could give regulators latitude in how they define what crypto companies can do with yield products, said Corey Frayer, director of investor protection at the Consumer Federation of America. He said the wording of the rulemaking section could allow crypto firms to conduct the activities and then pay the returns back to customers. The wording in the section allows regulators to consider balance, duration and tenure as a factor in rewards calculation. Other factors that would be considered include the definition of the activity and whether some sort of incentive program is used.
Senators Alsobrooks and Tillis have been negotiating details of the text for the last few months, after a Senate Banking Committee markup on the overall Clarity Act was postponed last-minute in January. Since then, bank lobbyists and crypto insiders have been weighing in on the compromise effort, sometimes in session hosted by the White House.
The text also includes anti-evasion language.
In March, the lawmakers had said they'd struck an agreement that blocked crypto firms from offering yield that looked like deposit interest but did allow them to structure rewards programs that didn't rival banks' core products.
In a statement, Digital Chamber CEO Cody Carbone said the trade association "welcomes the public release of stablecoin yield language as an important step toward resolving one of the final issues standing between the Committee and a markup. We are encouraged to see this process moving forward and will continue advocating for the power of rewards to drive consumer utility, competition, and innovation across the digital asset ecosystem.
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