The CLARITY Act bans passive stablecoin yield but allows rewards tied to payments, liquidity, staking or risk. Platforms must unbundle return from settlement.
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The CLARITY Act would prohibit passive stablecoin yield. Crypto platforms generally could not pay customers simply for holding payment stablecoins or recreate bank-deposit interest under another name.
Yield would survive when tied to economic activity. Payments, remittances, liquidity provision, collateral, staking and loyalty programs could still generate rewards, pushing platforms to connect returns to transactions, services or risk.
The bill separates digital cash from digital investments. Stablecoins would become payment and settlement instruments, while yield migrates toward tokenized Treasuries, lending products and other regulated investment vehicles.
The legislation targets companies defined as "covered parties"–digital asset service providers and their affiliates, excluding permitted stablecoin issuers and certain registered foreign issuers. The central prohibition is direct: a covered company could not pay interest or yield, in cash, tokens or another form, solely because a customer holds a payment stablecoin. Compensation that is economically or functionally equivalent to deposit interest is also barred.
That language aims at the account wrapped around the stablecoin, not the coin itself. Many dollar-backed stablecoins are supported by reserves including Treasury securities and cash-equivalent assets. The question has always been who gets the return on those reserves–the issuer, the platform sharing some with customers, or a separate investment product. The proposed law closes off one version: a crypto exchange or wallet presenting an idle stablecoin balance as the functional equivalent of an interest-bearing savings account.
Even balance-based formulas are not automatically prohibited. The bill says permissible compensation may be calculated by reference to a customer's balance, holding duration or tenure. A reward can rise with the size and duration of a balance without being classified as passive interest if it is tied to a qualifying transaction, service or activity. The commercial battle will therefore move from whether platforms can advertise an annual percentage yield to how convincingly they can connect compensation to customer behavior.
The bill's more revealing provisions concern what companies can still do. Rewards based on legitimate activity or transactions would remain permissible, so long as they are not functionally equivalent to deposit interest. The bill specifically contemplates incentives connected to payments, transfers, conversions, remittances and settlement. It also names rebates offered for accepting or using a payment stablecoin. Compensation could also be permitted when customers provide market-making liquidity, post collateral for trading or otherwise place assets at credit or investment risk. Participation in governance, validation, staking and other products or services could also qualify.
That distinction matters for how platforms structure products. A simple offer–hold $10,000 in stablecoins and earn 4%–would sit squarely in the danger zone. A program rewarding a customer for using stablecoins to make payments, provide liquidity or post collateral could survive, depending on its structure and forthcoming regulations. Platforms are likely to unbundle products that now appear seamless to consumers. One balance might function as payment money and pay no passive return. Another could be swept into a lending arrangement, tokenized money-market fund or other investment vehicle with separate risk disclosures. A third could earn incentives through transactional usage.
The economic return may not disappear. It may migrate into products that more clearly reveal what generates it. That could benefit tokenized Treasury funds and other on-chain investment products. Stablecoins would serve as the settlement layer, while yield-bearing instruments would serve as the investment layer. The cleaner that separation becomes, the harder it will be to describe every dollar-denominated blockchain asset simply as digital cash.
The Securities and Exchange Commission, Commodity Futures Trading Commission and Treasury Department would have one year after enactment to jointly clarify the boundary and publish a nonexclusive list of permissible programs. Companies that structure programs in good-faith reliance on the statutory exceptions would receive a limited opportunity to correct them if regulators later disagree. That rulemaking could become as important as the legislation itself.
Knowing and willful violations could carry Treasury Department civil penalties of as much as $5 million for each violation.
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