CLARITY Act clash centers stablecoin rewards

TLDR

Disagreements over how the CLARITY Act treats stablecoin rewards have become one of the main reasons the US crypto market bill is stalled in the Senate.

1. The current draft already bans interest on payment stablecoins, but banks want most reward programs banned too, while crypto firms say that goes too far.
2. The outcome will shape which stablecoin yield and rewards products are allowed in the US, and how much they can compete with traditional bank deposits.
3. With odds of passage cut to around one quarter and ethics rules also unresolved, stablecoin reward rules may instead be decided later by regulators.

Deep Dive

1. How The CLARITY Act Treats Stablecoin Rewards

The CLARITY Act includes a section that would prohibit payment stablecoin issuers from paying interest or yield on those tokens, closing off direct interest-bearing digital dollar products. White House crypto adviser Patrick Witt highlighted that this interest ban is already in the text when he criticized banking leaders calling for tighter rules on stablecoin rewards and incentives.

Banking groups, including executives from major regional banks, have asked senators to extend that ban so that rewards, bonuses, and other incentives that behave like interest are also captured, arguing that otherwise the rule is easy to evade through marketing schemes. Crypto industry voices counter that this could cover legitimate loyalty or cashback programs that do not turn stablecoins into bank-like deposits, reducing consumer choice and innovation in payments and savings products.

Several reports note that negotiations over this issue, alongside ethics provisions, are a core reason the bill has not yet cleared the 60 vote threshold before recess, with prediction markets marking passage odds near 27 percent based on recent Senate delays.

2. Why Rewards Matter For Users And Banks

For stablecoin users, the key distinction is who funds the yield. The CLARITY Act targets interest and yield paid by the issuer on payment stablecoins, not necessarily returns from third party platforms that use those tokens in lending or DeFi strategies.

Banks argue that rewards tied to a users stablecoin balance or holding period could still pull large amounts of cash out of insured bank accounts, shrinking the pool of funds available for loans to households and small businesses. Crypto companies warn that very broad language could make even non interest-like promotions risky to offer, chilling new products and pushing users to offshore platforms.

Regulators in other jurisdictions already lean in this direction. The UK Financial Conduct Authority has explicitly barred stablecoin issuers from passing reserve income to token holders, while allowing non issuer platforms to offer yield subject to separate rules. The US debate is largely about whether CLARITY should hard code a similar line, or leave more flexibility for domestic innovation.

3. What To Watch Next

Current drafts give Treasury, the SEC, and the CFTC roughly a year after enactment to define what counts as an activity based reward on stablecoins, which would determine how far the ban reaches into rewards tied to usage or holding. That rulemaking process could become the real battleground if the bill becomes law.

In the near term, the Senate has pushed action on CLARITY into a narrow window after the August recess, and prediction markets and research firms now treat passage in 2026 as an uphill outcome. If the bill stalls, the SEC has indicated it is prepared to proceed with its own crypto rulemaking, which would not fully settle stablecoin reward treatment but could tighten oversight of yield products more broadly.

For crypto users and builders, the practical signal is to watch how any new US rules distinguish payment stablecoins used for transfers from yield-bearing instruments, and how tightly regulators link rewards to bank-like deposit regulation.

Conclusion

The clash over stablecoin rewards in the CLARITY Act is less about banning stablecoins and more about who controls yield on digital dollars. Banks want strong limits to protect deposits, while crypto firms seek room for innovation in rewards and savings products. Until that tension is resolved, broader US crypto market structure reforms will move slowly, and the future of yield-bearing stablecoin products will remain uncertain.