Under the latest proposal addressing the most debated segment of cryptocurrency market regulation, earning yield simply by holding stablecoins would be banned—an approach closely aligned with discussions since the beginning of the year.
Newly unveiled text from the Digital Asset Market Clarity Act, released Friday, shows that Senators Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.) reached a compromise that would prohibit stablecoin issuers from offering returns to investors who merely hold their stablecoins. The provision argues that “depository institutions deliver financial services critical to the health of the American economy,” and should stablecoin providers offer comparable services, it “may hinder” those institutions.
Agreement on this issue removes a major obstacle preventing a Senate Banking Committee hearing (commonly referred to as a markup) from moving forward—bringing the legislation significantly closer to advancing through the Senate, even though several other negotiation points remain publicly unresolved.
“Mark it up,” urged Coinbase CEO Brian Armstrong in a post on the social media platform X. His firm has played a central role in these negotiations and stood to face the greatest impact from limitations on stablecoin incentives.
Paul Grewal, Coinbase’s chief legal officer, commented separately that the proposed language “protects activity-based rewards connected to genuine participation on crypto platforms and networks—precisely what the banking lobby indicated they wanted,” and added, “We’re committed to getting legislation passed and are confident that this language should not serve as grounds for opposition.”
The legal provision states, “No covered party shall, directly or indirectly, pay any form of interest or yield (whether in cash, tokens, or other consideration) to a restricted recipient — (A) solely in connection with the holding of such restricted recipient’s payment stablecoins; or (B) on a payment stablecoin balance in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.”
However, this prohibition does not extend to incentives “based on bona fide activities or bona fide transactions” that differ from returns generated through interest-bearing bank deposits—mirroring the structure of rewards programs offered by financial companies for credit card usage. The ban does cover loyalty programs or comparable initiatives.
A source at a cryptocurrency firm explained that this would force digital asset companies to overhaul their yield models, shifting from a “purchase and hold” framework to a “purchase and actively use” structure in order to satisfy the transaction-based conditions outlined in the text.
Exactly how this would operate in practice remains unclear, the source noted, highlighting the bill’s rulemaking provisions, which instruct the Treasury Department and Commodity Futures Trading Commission to initiate a regulatory rulemaking process within one year of enactment, establishing more precise guidelines for when and how crypto firms may offer yield.
Corey Frayer, director of investor protection at the Consumer Federation of America, observed that the language of the rulemaking provision could afford regulators considerable discretion in determining what crypto companies are permitted to do with yield products. He suggested the wording could enable crypto firms to perform certain activities and subsequently pass returns along to customers. The provision permits regulators to factor in account balance, duration, and tenure when calculating rewards. Additional considerations include precisely defining qualifying activities and whether a specific type of incentive program is utilized.
The proposal also contains provisions designed to prevent firms from circumventing these restrictions.
Senators Alsobrooks and Tillis have been refining the details over recent months after a Senate Banking Committee markup of the broader Clarity Act was postponed at the last minute in January. In the time since, banking industry lobbyists and crypto sector stakeholders have provided input on the compromise, at times during sessions organized by the White House.
Back in March, the lawmakers announced they had reached a deal preventing crypto companies from offering returns resembling deposit interest while permitting them to design rewards programs that wouldn’t directly compete with banks’ core offerings.
Cody Carbone, CEO of the Digital Chamber, stated in a release that the trade group “welcomes the public disclosure of the stablecoin yield provisions as a meaningful step toward closing one of the final gaps standing between the Committee and a markup. We are encouraged by this forward momentum and will continue championing the role of rewards in driving consumer adoption, competition, and innovation throughout the digital asset ecosystem.”
UPDATE (May 1, 2026, 21:54 UTC): Includes remarks from Coinbase executives.
UPDATE (May 1, 2026, 22:26 UTC): Includes further detail.
UPDATE (May 1, 2026, 23:31 UTC): Includes additional detail.
