Tag Archives: stablecoin

CLARITY Act Dies—Stablecoin Yields Survive

CLARITY Act Dies—Stablecoin Yields Survive

The CLARITY Act died on the Senate floor this week. A procedural vote failed 49 to 50, short of the 60 needed to move forward. Senator Cynthia Lummis, the bill’s most passionate advocate, called it over. For anyone who spent the past year hoping Congress would finally deliver a comprehensive rulebook for digital assets, the result stings.

But here is the thing about Washington. When 1 door slams shut, another often stays cracked open. For stablecoin holders, that crack is wide enough to keep earning yield.

Changpeng Zhao, the former Binance chief, pointed out the silver lining shortly after the vote failed. His take was simple. The technology keeps moving. The yield keeps flowing. If there is any silver lining, stablecoins can continue to have yield, CZ wrote. The CLARITY Act would have added new restrictions on stablecoin rewards. It did not pass. Those restrictions never took effect.

Let me walk through what this means, because the details matter more than the headlines.

The CLARITY Act was a big bill. It aimed to divide oversight of crypto between the SEC and the CFTC. It tackled decentralized finance. It created a circuit breaker mechanism that would have let the Treasury Department restrict stablecoin rewards for up to 18 months if those rewards threatened to pull deposits out of community banks with less than $10 billion in assets. Banking groups loved that provision. Crypto exchanges hated it.

The bill failed. Those proposed limits on platform-level stablecoin rewards vanished with it.

Now, here is the part people often miss. Stablecoins already operate under a separate law called the GENIUS Act, which Congress passed and President Trump signed in July 2025. That law bars stablecoin issuers from paying interest or yield directly to token holders. GENIUS Act Section 4(a)(11) bans stablecoin issuers from paying holders any yield. Circle cannot pay you interest on your USDC. Tether cannot pay you interest on your USDT. That restriction remains in force today.

But the GENIUS Act never restricted platforms. Exchanges, wallets, and other intermediaries can still pay rewards on stablecoin balances they hold for customers. The GENIUS Act permits intermediaries such as exchanges to pass yield from the underlying Treasury reserves to users. DeFi protocols can still generate returns through lending, liquidity provision, and other on-chain activity.

This is not a technicality. It is the core of how stablecoin yield works in practice.

Take Coinbase. The exchange pays USDC holders 3.5% APY on balances held in its app. Coinbase calls this a loyalty reward. The money comes from a revenue-sharing arrangement with Circle, the company that issues USDC. Coinbase does not issue USDC. Circle does. Coinbase pays USDC holders 3.5% APY, calls the payment a loyalty reward, and books the residual under a 50/50 revenue share of reserve income with Circle.

That arrangement sits outside the GENIUS Act’s issuer yield ban. The statute bans issuer-paid yield. It does not ban affiliate-paid yield. Issuer-paid yield was banned. Affiliate-paid yield was not addressed. The reward Coinbase pays sits structurally outside the statute as enacted.

The numbers here are substantial. Coinbase reported $305 million in Q1 2026 stablecoin revenue, the single largest line inside a subscription and services business that now contributes 44% of total revenue. The platform holds more than a quarter of all USDC in circulation, roughly $19 billion in balances inside its products.

DeFi protocols offer another channel. Aave, the largest decentralized lending protocol with approximately $38.6 billion in TVL, pays USDT supply rates typically between 4% and 6% APY. On Aave, USDC supply rates typically track USDT closely at 4% to 6% APY, with Compound offering USDC yields in the 4% to 7% APY range. Morpho Blue adds a premium of 50 to 150 basis points over Aave for equivalent risk. Ethena’s sUSDe has paid between 5% and 15% historically, though those yields fluctuate with market conditions.

These returns come from real economic activity. Borrowers pay interest. Traders pay funding rates. Liquidity providers earn fees. The yield is not a marketing gimmick. It reflects actual demand for capital.

The stablecoin market itself has grown enormously. Total stablecoin market cap reached roughly $316 billion as of June 12, 2026, according to DefiLlama data. That is nearly 12 times the $27 billion recorded at the end of 2020. USDT holds about 59% of supply and USDC about 24%, a combined 83% of the market. Citigroup projects the market could reach $1.9 trillion by 2030. Standard Chartered sees $2 trillion by the end of 2028.

Those projections assume stablecoins keep offering competitive yields. If regulators kill yield entirely, the math changes. The banking industry knows this. That is why the American Bankers Association and 7 other trade groups fought so hard for the CLARITY Act’s yield restrictions. The American Bankers Association and others have urged lawmakers to use the Clarity Act to close a legal loophole that allows digital asset service providers to avoid the existing prohibition on stablecoin interest and yield.

Their argument is straightforward. If stablecoins pay attractive yields, depositors will move money out of traditional bank accounts and into stablecoin platforms. Community banks will lose funding for loans. Small businesses will suffer. The state associations said stablecoins should serve as a payment tool, not a store of value. They warn that such incentives could move deposits away from local lenders.

The crypto industry calls that argument anticompetitive. Banks pay interest on deposits. Why should stablecoin platforms face a different standard?

History offers an interesting parallel. In 1980, the Independent Bankers Association warned that money market funds would drain deposits and weaken lending. A letter submitted by the Independent Bankers Association of America in a 1980 hearing of the Senate Banking Committee on money market funds made arguments almost verbatim from what they argue today: threat to deposits, harms lending, uniquely dangerous for smaller banks. Money market balances grew parabolically into the trillions, and banks remain flush with deposits. Bank deposits did not disappear. By 2022, Federal Reserve data put total bank deposits near $18 trillion.

The CLARITY Act’s failure does not settle this debate. It simply delays it.

The Office of the Comptroller of the Currency has proposed a rule that would treat certain issuer-platform revenue-sharing arrangements as a workaround of the GENIUS Act ban. The notice of proposed rulemaking issued on February 25, 2026 includes a rebuttable presumption that any coordinated arrangement between an issuer and an affiliate or related third party to pay holders yield is itself a prohibited yield arrangement. The comment period closed on May 1, 2026. Banks pushed for an even broader reading. Exchanges pushed back hard.

If the OCC’s reading survives, the Coinbase-Circle rewards structure could face serious challenges. That would hurt Coinbase’s revenue. It would also hurt Circle, which relies on Coinbase as its largest distribution partner. In 2024, Circle paid Coinbase $908 million of its $1.01 billion in total distribution costs. That payment exceeded Circle’s net income. Circle’s net profit was $155 million in 2024.

But as of today, that rule remains a proposal. It has not taken effect. The yield continues.

My point is not that regulation does not matter. It was that technology does not wait for politicians. Stablecoin yield exists because people want it. Borrowers want capital. Lenders want returns. Exchanges want revenue. Users want passive income on their digital assets.

The CLARITY Act would have added a layer of restrictions on top of the GENIUS Act. It failed. That layer never materialized. Platforms can still pay rewards. DeFi protocols can still generate yield. The market keeps functioning.

This is not a permanent state of affairs. Future legislation could change the rules. The OCC could finalize its proposed rule. Enforcement actions could shift the landscape. But for now, the situation is clear. The extra platform-level ban did not become law. Stablecoin yield continues through existing channels.

For anyone holding stablecoins and wondering whether they can still earn a return, the answer is yes. The CLARITY Act failed. Everything continues. And that is worth noting, even if the broader regulatory picture remains frustratingly incomplete.

 

 

 

 

Source: https://www.benzinga.com/Opinion/26/09/61816221/clarity-act-dies-stablecoin-yields-survive

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author. The latest book is Web4: The Age of Autonomous Intelligence.

www.anndy.com
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The Stablecoin in the Headlines Is Not the Stablecoin I Know

The Stablecoin in the Headlines Is Not the Stablecoin I Know

When you scroll through the financial news these days, you meet one stablecoin. The articles describe a digital dollar, a boring token that hugs the greenback, and a shiny new tool for Wall Street. Then you open a DeFi app and meet something else entirely, a lively instrument that moves at 3 a.m. on a Sunday and settles in seconds.

My complaint with the coverage is simple. The media keeps flattening three different animals into one word, and that word hides the parts I care about most. So let me separate the animals, because a public-chain stablecoin, a private-chain stablecoin, and a tokenized deposit do not share much beyond a family resemblance.

The Public-Chain Stablecoin

Start with the creature crypto natives know first. A typical stablecoin in our world is a fiat-collateralized token, and the idea is refreshingly simple. For every digital token an issuer mints on a blockchain, one real dollar sits in a bank account or in a short-term U.S. Treasury bill.

USDT and USDC dominate this market, and together with the rest of the field, they push the total stablecoin market cap past $300 billion in 2026. Traders use these tokens as the base pair for everything, parking value between bets without touching a bank. I use them for what I love most, which is DeFi.

They fuel lending markets on Aave, for instance, and they let anyone with a phone and a wallet earn, borrow, and settle without asking a branch manager for permission.

That permissionless quality is the whole point, and it is also the part the headlines skip. A public-chain stablecoin lives on Ethereum, Solana, or TRON and follows smart-contract code that anyone can read. You hold it in your own wallet with your own keys. You send a million dollars to a friend on another continent at 2 a.m. on a Sunday, and no bank approves the trip.

Every transaction is printed on a public ledger that anyone can audit with a block explorer. That transparency cuts both ways, and it is why regulators actually love these ledgers as tools for tracking illicit finance, but it also means the system answers to mathematics before it answers to a committee.

The Private-Chain Version

Now meet the second animal, the one Wall Street prefers. Banks can also mint dollar tokens, but they do it on private blockchains where only approved clients participate. JPMorgan runs JPM Coin on its own internal ledger, and the bank now moves billions of dollars a day for corporate clients through that system.

The industry calls this a wholesale stablecoin or a tokenized deposit, and the GENIUS Act, which President Trump signed in July 2025, explicitly lets licensed banks build on private chains with built-in controls. The differences from the public version are not cosmetic.

A corporation does not want rivals watching its treasury flows, a bank wants the power to freeze or reverse a mistaken transfer, and nobody wants to pay public gas fees that spike without warning. So the private chain trades openness for control, and it serves interbank settlements and large corporate payments rather than you and me.

The Third Animal Is Different

The third animal is not a stablecoin at all, even though journalists keep calling it one. The dollar balance you see in your PayPal or Venmo app is a stored-value liability under state money-transmitter law, and the balance in your Chase app is a commercial bank deposit insured by the FDIC up to $250,000.

The Federal Reserve’s FedNow rail, which launched in 2023, settles bank dollars instantly around the clock without any ledger technology. Federal law draws a bright line here. To earn the name stablecoin, a digital dollar must exist as a token on a distributed ledger, and the law does not care whether that ledger is public or private.

Off-chain database dollars fall under older banking and electronic-money rules, and they come with fractional-reserve lending rather than the strict one-to-one reserve mandate that the GENIUS Act sets for payment stablecoins.

What Washington Sees

Notice what Washington sees in all of this, because the government views stablecoins through a completely different lens than either crypto natives or bankers do. Treasury officials cheer dollar-backed stablecoins as hungry buyers of short-term U.S. debt, and Tether alone holds roughly $140 billion in Treasuries, a stake that ranks it ahead of countries like South Korea and the United Arab Emirates.

Lawmakers wrote the GENIUS Act to turn stablecoin issuers into something like narrow banks that must hold cash and Treasuries one-to-one, publish audited reserve reports, and freeze tokens when law enforcement flags a wallet.

The law also strips stablecoins of any interest payment, and a separate executive order blocks the Federal Reserve from issuing a central bank digital currency. Washington therefore anoints the private, regulated stablecoin as America’s digital dollar, treating the token more like a digital cashier’s check than Bitcoin.

Why Reserve Quality Matters

That legal carve-out explains why the government refuses to call a payment stablecoin a security or a commodity. The SEC and the CFTC police bets on rising prices, and a token that stays at one dollar and pays no yield gives nobody an expectation of profit.

Banking regulators like the OCC and the Federal Reserve take the stablecoin file instead, because a run on a big issuer would spill into real banks and the Treasury market, while a crash in a speculative coin mostly burns its own holders. The 2022 collapse of TerraUSD perfectly illustrates risk.

That algorithmic coin had no real reserves backing it, and when trust evaporated, it fell from $1 to a few cents, wiping out about $45 billion in market value in days. Reserve quality is the entire game, and the law now writes that lesson into statute.

Where I Plant My Flag

Here is where I plant my flag. The private-chain version and the tokenized deposit do real work for corporate treasurers, and I welcome the clarity the GENIUS Act brings. I still root for the public one because openness compounds.

A permissionless dollar token lets a freelancer in Manila collect wages from Berlin in seconds for pennies, lets an unbanked teenager hold digital cash that no one can freeze with a phone call, and lets developers compose money into code the way they compose software.

DeFi turns those tokens into credit markets, savings tools, and insurance pools that run in the open, and every transaction leaves a public trail that any citizen can check. The private rails optimise for institutional comfort, while the public rails optimise for user dignity.

So the next time a headline calls stablecoins “boring digital dollars,” ask which animal the writer actually means. The answer changes everything about the risk you hold, the rights you keep, and the future you get. I know which one I hold, and I know which one I cheer for.

 

Source: https://www.financemagnates.com/cryptocurrency/the-stablecoin-in-the-headlines-is-not-the-stablecoin-i-know/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author. The latest book is Web4: The Age of Autonomous Intelligence.

www.anndy.com
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Stablecoin Yield Ban Deal Clears Path for Landmark Crypto Law in April

Stablecoin Yield Ban Deal Clears Path for Landmark Crypto Law in April

The recent bipartisan agreement on stablecoin yields marks a pivotal moment for United States crypto regulation, and it demands careful scrutiny from those who understand both the technical realities of decentralized finance and the political pressures shaping this legislation. Senators Thom Tillis and Angela Alsobrooks have reached an agreement in principle with the White House to restrict yield on passive stablecoin balances, a compromise that resolves a major standoff between traditional banks and crypto innovators. This development removes a critical roadblock to the CLARITY Act, potentially enabling a committee markup in the second half of April, with a target window of April 14 to 20 for Senate Banking action.

The core of this compromise centers on how stablecoin rewards can be paid, specifically targeting yield paid on idle balances. Reports indicate the deal would bar rewards on passive stablecoin balances, addressing banks’ fears that high on-chain yields could drain deposits, while possibly still allowing activity-based rewards on certain products. Senator Alsobrooks framed the agreement as protecting innovation while preventing widespread deposit flight, while Senator Tillis stressed that industry still needs to vet the language before it becomes locked in. This distinction between passive and active yields matters tremendously for how users interact with digital assets. A person who holds stablecoins simply to preserve value faces different constraints than someone actively participating in liquidity provision or governance. The technical challenge lies in defining these categories without creating arbitrary boundaries that stifle legitimate innovation or push activity offshore. Having examined similar regulatory frameworks globally, I recognize that the devil truly resides in these implementation details.

This yield dispute represented one of the primary reasons the Digital Asset Market Clarity Act remained stalled in the Senate Banking Committee, despite versions advancing through other legislative channels. With this compromise in place, Senate Banking leaders now prepare for an April markup and potential mid April vote, giving the CLARITY Act its first real path forward in months. If the bill progresses, it can move to the Senate floor and be reconciled with earlier work, potentially delivering the first broad United States market structure law for crypto on top of the 2025 GENIUS Act stablecoin framework. This timeline creates both opportunity and pressure. Legislative windows can close quickly, and the details finalized in committee often determine a bill’s ultimate impact more than its broad intentions. For those watching institutional adoption trends, this sequence matters because regulatory clarity often precedes significant capital allocation decisions.

The CLARITY Act aims to spell out federal jurisdiction, giving the SEC and CFTC defined roles and establishing rules for trading platforms, custody, tokens and stablecoins. Limiting yield on passive stablecoin balances would likely constrain United States based park and earn stablecoin products, while still giving room for more regulated, bank compatible designs if they tie rewards to activity. This tradeoff reflects a fundamental tension in crypto regulation. Users seeking yield on idle assets represent a significant portion of retail participation, and restricting these options could reduce domestic engagement with digital assets. At the same time, traditional financial institutions require certain guardrails before committing substantial resources to this emerging sector. The challenge involves creating a framework that protects consumers without eliminating the very features that make decentralized finance attractive. Having analyzed market liquidity patterns and derivatives volume as indicators of sentiment, I observe that regulatory uncertainty often suppresses participation more than any specific rule might.

Other open issues, including DeFi treatment and ethics rules on officials holding crypto, could significantly affect how permissive or restrictive the final regime becomes for on chain finance and institutional participation. The definition of passive balances remains particularly crucial because it determines which activities fall under restriction. Does providing liquidity in a decentralized pool count as passive or active? What about staking tokens to secure a network? These questions cannot be answered through political compromise alone. They require technical expertise and a genuine understanding of how blockchain systems function. Having served in government advisory roles related to blockchain technology, I recognize the difficulty of translating technical concepts into legislative language. Getting this translation wrong risks creating rules that either fail to address real risks or inadvertently harm legitimate innovation.

This compromise represents progress but not a finished solution. This is mentioned in my previous article too. The United States stands at a crossroads where it can either lead in shaping a thoughtful regulatory environment for digital assets or cede that leadership to jurisdictions with more flexible approaches. The CLARITY Act’s potential to define federal rules for exchanges, custody and stablecoins offers a foundation for broader institutional comfort with digital assets. The tradeoff of tighter limits on easy stablecoin yield in exchange for regulatory certainty requires careful evaluation. For users who value financial sovereignty, the distinction between passive and active yields may feel arbitrary when the underlying technology treats all transactions with equal transparency. The risk involves creating a system that favors incumbent financial structures over emerging decentralized alternatives, potentially slowing the very innovation that could enhance financial inclusion and resilience.

Watch for the published committee draft, the exact wording on passive balances, and DeFi language, because those details will decide whether this framework becomes mainly a compliance burden or a foundation for larger, safer crypto adoption in the United States. The April markup window provides a critical opportunity for industry stakeholders to engage with lawmakers on these technical nuances. Having followed the evolution of crypto regulation across multiple jurisdictions, I observe that the most effective frameworks emerge from ongoing dialogue between policymakers and technologists. The stablecoin yield compromise removes a significant obstacle, but the journey toward comprehensive crypto market law requires continued attention to how rules affect real world usage patterns. For those building the next generation of financial infrastructure, the stakes extend beyond immediate compliance to the long term viability of decentralized systems within a regulated environment.

The political dynamics surrounding this legislation reflect broader tensions about the future of money and financial power. A bipartisan deal that addresses bank concerns while preserving some room for crypto innovation demonstrates the possibility of constructive compromise. The ultimate test will be whether the resulting framework enables the United States to harness the benefits of blockchain technology while managing its risks. The flow from compromise to committee markup to potential floor vote creates a sequence where each step offers opportunities for refinement or regression.

No matter what happens, I will still believe in the decentralized future, the next evolution of the internet.

 
 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author. The latest book is Web4: The Age of Autonomous Intelligence.

www.anndy.com
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