On Friday evening, it was announced that a compromise was reached on language prohibiting yield on payment stablecoins. Crafted to serve as a compromise between the banking and crypto sectors in the market structure debate, the revised language would:
- Prohibit yield on payment stablecoin balances “in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.”
- Permit yield on payment stablecoins that is “based on bona fide activities or bona fide transactions that are not economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.”
- Require a Treasury Department rulemaking within one year to clarify the circumstances in which the prohibition and permission would apply.
Responding to the news on Friday, Coinbase Chief Policy Officer Faryar Shirzad appeared to endorse the Tillis-Alsobrooks language, saying the crypto exchange protected the ability of Americans to earn payment stablecoin rewards and declaring the debate settled.
While the yield debate has been the primary sticking point in the CLARITY Act debate, the bill has faced new hurdles in recent weeks. Law enforcement groups, including the Fraternal Order of Police and the National District Attorneys Association, have expressed opposition to the bill, citing concerns that its weak BSA/AML provisions would “further exacerbate” fraudulent and illicit activity on crypto platforms.
Further, Senate Democrats aim to strengthen provisions in the bill that would limit the ability of members of the Executive Branch to participate in digital asset issuance.
