CLARITY Act Fixes GENIUS Act Loophole on Stablecoin Yields

Key Insights:

• The CLARITY Act targets interest-like stablecoin rewards, closing a key loophole in the GENIUS Act.
• Lawmakers allow activity-based incentives but restrict yield-style payouts.
• The deal clears a major hurdle, but DeFi and tokenization rules are still pending.

The CLARITY Act is taking a new turn, bringing renewed clarity to stablecoin regulation. The new update in the crypto bill aims to fix a loophole left by the earlier GENIUS Act. The new rules focus on how stablecoin-related rewards and yields are handled.

CLARITY Act Targets Stablecoin Yield and Reward Practices

According to the latest Forbes report on stablecoin news, U.S. senators have agreed on a new proposal in the CLARITY Act. Senators Thom Tillis and Angela Alsobrooks have reached an agreement on the treatment of stablecoin yields.

CLARITY Act Update | Source: Forbes Report

Notably, the revised language clearly states that rewards must not resemble or function like interest from a traditional bank deposit. This move is aimed at closing regulatory gaps and preventing platforms from offering interest-like returns under different labels. This brings more clarity and consistency to the stablecoin market.

It is also worth noting that the new stablecoin bill aims to address a gap in the earlier GENIUS Act. The GENIUS Act banned stablecoin issuers from paying interest directly. It didn’t fully address how exchanges or affiliated platforms might offer rewards that effectively act like yield in the secondary market.

It is this confusion that the latest stablecoin yield proposal intends to fill. Under the new language, any rewards offered by covered entities will be restricted if they function like a deposit interest. At the same time, the bill still allows genuine platform-based rewards, such as incentives for usage or activity. But they should not cross the line into interest-like returns.

How This Deal Clear Key Hurdle for CLARITY Act Progress?

It is worth noting that the new stablecoin agreement removes one of the biggest obstacles to the CLARITY Act’s progress. It could settle the debate around the stablecoin yield proposal.

However, key areas still need to be addressed. These topics include tokenization, protections for decentralized finance (DeFi), and safeguards for software developers. Senate Banking Committee Chair Tim Scott stated that the crypto bill needs full Republican backing before it can proceed.

How Industry Experts React?

Industry experts see this development as a pivotal step. Summer Mersinger, CEO of the Blockchain Association, praised Senators Tillis and Alsobrooks for reaching the agreement. She noted that resolving the stablecoin yield issue could help push the bill closer to becoming law.

Mersinger also emphasized that the US has a strong chance to position itself as a global leader in crypto regulation. But she added that this could be possible only with the progress of the CLARITY Act.  A committee markup, where the bill is reviewed and amended, is currently expected to take place in May.

Another major figure who responded is Coinbase Chief Policy Officer Faryar Shirzad. He noted, “The ability for Americans to earn rewards, based on real usage of crypto platforms and networks.”

Coinbase Chief Legal Officer Paul Grewal also echoed this statement. He stated that much of the earlier debate was based on “perceived risks” rather than how crypto systems actually work. He added that allowing activity-based rewards is consistent with what even bank lobbyists had originally supported.

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