Clarity Act Gains Traction After Stablecoin Yield Deal

Senators reached a tentative agreement on Friday to limit interest-like payments on stablecoins and to clarify when exchanges and other crypto firms may offer rewards. Coinbase CEO Brian Armstrong posted “Mark it up,” signaling support for a committee markup that could advance the bill.

Under the draft language, the Clarity Act would ban payments that are “economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.” The text would permit rewards or incentives tied to specific, bona fide activities such as transactions, payments, transfers, remittances and providing liquidity in decentralized finance (DeFi).

The proposal would give federal regulators one year to issue rules that define when a payment crosses the line into prohibited interest. That timeline places key technical definitions and enforcement guidance in the hands of agencies rather than lawmakers.

The compromise follows earlier legislation that barred stablecoin issuers from paying yield on customer balances. That initial ban responded to concerns from banks that customers could move funds from traditional deposit accounts into higher-yielding stablecoin products. Lawmakers debated whether the ban should also cover third-party platforms, like exchanges and lending services; the Clarity Act aims to resolve that question.

Armstrong withdrew support for the bill in January, prompting Senate Banking Committee Chair Tim Scott to postpone a planned markup while negotiators worked on changes. Scott has indicated he is aiming for a bipartisan committee markup in May.

Reactions in the crypto community were mixed. Investor Nic Carter wrote, “The banks won.” Attorney Scott Johnsson described the text as acceptable. Blockchain Association CEO Summer Mersinger urged the committee to move forward without delay and said resolving the yield question brings the Senate closer to advancing market-structure legislation.

If the Senate advances the bill, lawmakers will need to reconcile its text with a version the House passed nearly a year ago before it can reach the president. With the election season approaching, legislative work could slow. The one-year regulatory timeline means that detailed rules on what counts as permissible rewards versus banned interest will be developed by federal agencies.