Stablecoin Yield Payments Get Green Light in CLARITY Act Amendment

The Senate Banking Committee has reached a compromise on the CLARITY Act, introducing an amendment that permits stablecoin issuers to pay yield on customer deposits.

Initially, Section 404 of the GENIUS Act prohibited stablecoin issuers from paying interest solely in connection with holding payment stablecoins. However, the new amendment explicitly carves out exceptions for activity-based rewards and incentives.

The list of permissible activities includes transactions, market-making, staking, and participation in governance or validation programs. Rewards from these activities can be distributed to customers based on their stablecoin balances.

Crypto platforms such as Coinbase, Binance, and Crypto.com are already offering stablecoin yield arrangements that align with the new amendment's provisions. These platforms will be able to use customer stablecoin deposits for lending, investing, or other high-risk activities.

Community banks may struggle to compete with the interest rates offered by crypto platforms, potentially compromising their ability to provide small business loans and agricultural land loans.