US Senate bill targets stablecoin rewards programs

TLDR

A new US Senate draft of the CLARITY Act would sharply curb stablecoin rewards on centralized platforms, putting popular yield programs and some exchange revenues at risk.

1. The draft, led by Senators Thom Tillis and Angela Alsobrooks, bars exchanges from paying yield on passive payment stablecoin balances and limits access to data used to calculate rewards.
2. Coinbase, which earns a large share of revenue from USDC-related rewards, has withdrawn support for the bill, while analysts think Circle and USDC are less structurally threatened.
3. The bill is still a draft, and the key open questions are how activity based rewards will be defined and whether the Senate can keep a coalition together to pass it.

Deep Dive

1. What The Draft Actually Does

The latest Senate Banking Committee draft of the Digital Asset Market Clarity Act would prohibit digital asset service providers from paying interest or yield directly or indirectly on passive payment stablecoin balances, including structures deemed equivalent to bank interest. It also proposes restricting access to transaction size data used to compute tiered or volume based rewards, which would make many reward programs technically unworkable, not just restricted.

Reporting on the compromise notes that the proposal specifically targets exchange paid stablecoin rewards and further tightens earlier language that had already limited most yield structures while allowing only narrow loyalty type carve outs. Banks pushed for this approach, arguing that stablecoin yield programs pull deposits away from traditional lenders that use those deposits to fund credit markets.

2. Who Is Most Exposed

Coinbase has told senators it cannot support the current draft, with analysis estimating that eliminating US stablecoin yield could remove roughly 800 million dollars from its annual revenue, out of about 1.35 billion dollars in 2025 stablecoin revenue tied largely to its USDC partnership with Circle. This makes the yield language a core business issue, not a minor product tweak, for a major US exchange.

By contrast, Circle does not pay yield directly to USDC holders; it earns reserve income and shares part of it with partners such as exchanges. A separate analysis notes that while Circle stock dropped nearly 20 percent on the news, Citi and Bernstein argue the bill mainly targets user facing rewards and should not fundamentally impair Circles reserve income model or USDCs role in payments.

3. What To Watch Next

The bill remains a circulating draft. It still needs formal introduction, Banking Committee markup, a full Senate vote, reconciliation with the House version and presidential signature, a process that could take many months or even slip to a future Congress.

Key open issues are how regulators will draw the line between banned passive yield and permitted activity based rewards, such as transaction, loyalty or payment driven incentives, and whether compromises can keep both banks and major crypto platforms at the table. If the Senate cannot hold a coalition around this yield language, the broader market structure bill risks stalling again, prolonging regulatory uncertainty for US stablecoin businesses.

Conclusion

The Senate draft aims to pull stablecoin rewards closer to a banking style regime by eliminating passive yield on centralized payment stablecoin balances, primarily to protect traditional deposits. That choice threatens a major revenue line for exchanges such as Coinbase while likely leaving issuers like Circle more structurally intact, and it keeps the fate of US stablecoin rewards tied to an unresolved political fight over how far banks should be shielded from stablecoin competition.