The CLARITY Act: How the U.S. Is Rewriting the Stablecoin Playbook

On May 1, Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) released the CLARITY Act compromise on stablecoin remuneration.

As expected, the text prohibits passive yield on stablecoins in order to protect bank deposits, while allowing rewards tied to actual usage.

The two senators, from opposite sides of the aisle, found common ground on Section 404 of the CLARITY Act, a federal bill aimed at establishing a regulatory framework for stablecoins in the United States.

The provision puts an end to months of deadlock over a central question: can crypto platforms like Coinbase or Kraken pay yield on stablecoins held by their U.S. customers?

The new language prohibits any actor in the value chain — exchanges, custodians, affiliated platforms, and so on — not just issuers, from paying yield solely on the basis of stablecoin holdings, or in any manner "economically or functionally equivalent" to a bank deposit.

That said, the text carves out an exception for rewards tied to genuine usage ("activity-based rewards").

The three regulators involved — the SEC, the CFTC, and the Treasury — now have twelve months to jointly define which activities qualify. Payments, market-making, staking, and governance are expected to make the list.

In practice, the compromise forces a clear paradigm shift: from "buy and hold" to "buy and use."

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Banks Can Breathe Easy

Section 404 draws a hard line around passive yield. Institutional strategies built on treasury management or "parking" liquidity in stablecoins will now need to demonstrate real transactional activity to qualify for any form of remuneration.

The distinction between a money market fund substitute and a compliant stablecoin product becomes legally enforceable.

Still, the compromise leaves meaningful room for usage-based incentives. DeFi protocols, market-making operations, and payment-linked programs should remain viable — provided they meet the criteria set out in the forthcoming regulation.

For institutions active in on-chain settlement or cross-border payments, this could translate into a genuine competitive edge.

At its core, the provision protects the deposit base of the traditional banking system while allowing crypto platforms to compete on activity rather than passive yield.

"In the end, the banks were able to get more restrictions on rewards, but we protected what matters – the ability for Americans to earn rewards, based on real usage of crypto platforms and networks," said Faryar Shirzad, Coinbase's Chief of Policy. "We also ensured the US can be at the forefront of the financial system – which in this competitive geopolitical era is paramount," he added.

"The United States faces a clear choice in digital assets: lead or be led. Today’s progress is an encouraging signal that the U.S. is choosing to lead," reacted Dante Disparte, Chief Strategy Officer of Circle, the issuer of the USDC stablecoin.

>> Read the analysis: Yield-bearing stablecoins: The White House just blew up the banks' best argument

The Big Whale's Take

On paper, the distinction between "holding" and "using" stablecoins seems intuitive enough. Applying it in practice will be a different story entirely.

The real battleground will be the joint rulemaking the SEC, CFTC, and Treasury must deliver within twelve months. That's where the exceptions will either stay broad enough to matter — or get hollowed out.

The comparison with Europe is telling. MiCA takes an absolute stance: no remuneration linked to stablecoin holdings, whether from issuers or intermediaries. Articles 50 (for EMTs) and 22(4) (for ARTs) leave zero room for interpretation, and an anti-circumvention clause shuts the door on indirect workarounds.

The CLARITY Act takes a different approach. Rather than an outright ban, it distinguishes between passive yield (prohibited) and rewards tied to real usage, which remain permitted.

It's a more nuanced framework and, for holders, arguably a fairer one.

This contrast deserves attention as MiCA's built-in review clause could be triggered in the coming months. The European Commission may see it as an opportunity to revisit its blanket prohibition on yield.

The American precedent shows that it is possible to protect the banking deposit base without locking down every form of usage-based incentive. Without such an adjustment, Europe risks pushing a share of stablecoin innovation toward more accommodating jurisdictions.

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