The financial regulations sector has witnessed a significant development with the finalization of Section 404 in the Clarity Act. This provision restricts digital asset service providers from offering interest or yield to US customers solely based on their holdings of stablecoins.
According to the new language, 'covered parties' cannot pay any form of interest or yield to US customers in two specific scenarios: solely in connection with holding stablecoins and in a way that is economically or functionally equivalent to interest paid on a bank deposit.
This compromise allows crypto companies to offer rewards tied to actual on-chain activity, such as trading, transactions, staking, and on-chain transfers. The revised language draws a clear line between passive yield and activity-based rewards.