CLARITY Act draft on stablecoin rewards nears

TLDR

US lawmakers are close to releasing CLARITY Act draft language that could sharply restrict stablecoin rewards, intensifying a fight between banks and crypto platforms.

1. The coming draft would largely ban yield on passive stablecoin balances, while still allowing limited activity-based rewards.
2. Crypto firms like Coinbase and Circle say this could gut popular rewards programs, while banks fear massive deposit flight into stablecoins.
3. A draft release expected next week and Senate markup in April will determine whether stablecoins remain high-yield bank alternatives or revert to low-yield digital cash.

Deep Dive

1. What The Draft Is Expected To Do

Congressional sources say the Senate Banking Committee plans to publish CLARITY Act draft text within days, with a focus on stablecoin yield and rewards provisions. A recent report describes language that would prohibit platforms from offering yield "directly or indirectly" on stablecoins or balances that function like bank deposits, while still allowing narrowly defined activity-based incentives such as trading or payments rewards in the upcoming crypto bill draft.

This would sit on top of the existing GENIUS Act, which already forces issuers to fully back payment stablecoins with cash or short Treasuries and bars issuers from paying interest themselves. CLARITY is aimed at closing what banks see as a loophole that lets exchanges pass through Treasury yields to users via rewards.

2. Why Industry And Banks Are Fighting

Crypto platforms, led by Coinbase, argue that banning passive rewards on stablecoin balances would hurt consumers and eliminate programs that millions use to earn 45% on digital dollars. Industry leaders are drafting a coordinated counterproposal to soften these provisions and preserve "sustainable rewards programs" while addressing risk as highlighted by Coinbase policy statements.

Banks and their lobby groups argue the opposite, warning that allowing deposit-like yield on stablecoins could pull hundreds of billions out of traditional deposits, pressuring community banks and loan funding. Market reaction has already been sharp: reports of tougher draft language coincided with Circle stock sliding about 20% and Coinbase dropping double digits, as investors priced in lower future stablecoin revenue in recent coverage of CLARITY-related selloffs.

3. What To Watch Next For Crypto Users

Several near-term milestones matter:

1. The exact wording of the draft that Senate Banking is expected to release next week.
2. The committee markup, targeted for April, where amendments to stablecoin and DeFi language are most likely.
3. Whether a compromise emerges that still allows some form of passive or quasi-passive rewards without being treated like bank interest.

Beyond rewards, the CLARITY Act also includes broad market-structure rules on token classification, CFTC spot oversight, and DeFi developer protections, which Senator Cynthia Lummis has framed as "the strongest protection for DeFi and developers ever enacted" if passed in her recent comments.

Conclusion

The CLARITY Act draft on stablecoin rewards is shaping up as a pivotal test of whether US policy treats stablecoins as bank-like deposits or low-yield digital cash. The outcome will directly influence how attractive stablecoin rewards remain on platforms like Coinbase, how much pressure banks feel from deposit migration, and how quickly institutional capital grows comfortable with US-regulated stablecoins. Watching the released draft, the April markup, and any negotiated carve-outs around activity-based rewards will be key for anyone relying on stablecoins as a yield-bearing part of their crypto stack.