A new draft of the Senate CLARITY Act enables cryptocurrency firms to provide activity-based rewards to users of stablecoins.

The proposal, known as the Digital Asset Market Clarity Act, outlines that particular rewards and incentives related to the utilization of stablecoins are acceptable. However, it specifies that the act of offering rewards will not classify a stablecoin as a security or a product resembling a banking service.

“Families and small businesses benefit from clear rules of the road,” stated Senate Banking Chair Tim Scott in a comment to Cointelegraph. “This bill reflects months of serious work, ideas, and concerns that have been raised across the Committee, and it gives everyday Americans the protections and certainty they deserve.”

Controversies have arisen as stablecoin rewards are at the center of tensions between cryptocurrency entities and banking organizations. The banking sector contends that profit-generating stablecoin offerings are akin to unauthorized investment ventures or deposit functions. Conversely, cryptocurrency firms argue these programs act similarly to reward points or payment incentives frequently seen in financial technology.

Draft Bill Exempts Payments and Staking Rewards

Under the newly proposed bill, the restrictions do not apply to rewards connected to daily financial actions. These would include incentives related to payments, transfers, remittances, settlements, and rewards offered for utilizing wallets, accounts, platforms, or blockchain networks. Additionally, loyalty and promotional programs, subscription-based incentives, and rebates linked to stablecoin usage are included.

The draft further recognizes allowable rewards from liquidity provision or collateral use, as well as participants in governance, validation, staking, or wider ecosystem activities.

Draft bill identifies permissible activities. Source: Senate

The outlined clarified that a digital asset service provider “may not pay any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding of a payment stablecoin.”

The Senate Agriculture Committee has postponed its markup of the crypto market structure legislation until the last week of January, with Chair John Boozman citing a need for additional time to garner widespread bipartisan support.

Community Banks Call on Congress to Address Stablecoin Yield ‘Loophole’

Recently, a group of US community bankers urged Congress to modify the GENIUS Act, asserting that stablecoin issuers leverage loopholes that allow yield to be transmitted to token holders indirectly through exchanges and other partners.

These bankers warned that reward systems provided by crypto exchanges could divert billions of dollars from community banks, weakening their ability to extend loans to small businesses, farmers, students, and homebuyers.

The Crypto Council for Innovation and the Blockchain Association, significant advocacy groups within the cryptocurrency sector, dismissed the banks’ claims in a letter to the Senate Banking Committee last month, arguing “payment stablecoins are not used to fund loans” and that any proposed changes would hinder innovation and consumer choices.