Stablecoin Yield Ban Proposal Returns – Here’s What It Means For Coinbase, Circle

• A draft U.S. stablecoin bill reviewed on Monday proposed banning yield on stablecoins across exchanges.
• The proposal prevents interest on stablecoins, marking a shift from earlier discussions that had left room for such incentives.
•  Regulators, including the Securities and Exchange Commission, would jointly define permissible rewards within one year under the updated framework.

As lawmakers continue to work toward a middle ground between banks and crypto companies, a newly disclosed stablecoin proposal in Washington is once again drawing attention. 

The latest update to the Digital Asset Market Clarity Act (CLARITY Act) would prohibit platforms from offering yield on stablecoins “directly or indirectly,” including any mechanism deemed “economically or functionally equivalent” to interest. 

The draft language was reviewed by industry stakeholders following Monday's meeting, according to Eleanor Terrett. To curb workarounds, the restriction would apply broadly to digital asset service providers, including exchanges, brokers, and their affiliates. 

Limited Room For Rewards – For Now

For now, as long as they are not deemed as “interest”, the proposal allows some activity-based rewards, including loyalty programs, promotions, and subscription incentives. 

Additionally, within a year, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Treasury Department would be required to jointly define what constitutes acceptable rewards and to create anti-evasion regulations. But other aspects of the bill, such as token classification and DeFi provisions, are still being finalized before a possible committee markup.

Industry Continues To Stand Divided

Leaders in the industry who have read the text so far seem to be divided. According to Terrett, some warned that the "economic equivalency" standard is ambiguous and may eventually be applied more narrowly, characterizing the proposal as a "departure" from earlier talks with the White House. 

Another stated that the new updates are, for the most part, consistent with expectations.  Banking representatives are set to review the latest draft next.

Why It Matters For Coinbase, Circle

Stablecoin rewards have been a major source of contention between banks and cryptocurrency companies for a while now. Coinbase (COIN) CEO Brian Armstrong has previously fought against banning yield on stablecoins. Coinbase and its strategic partner, Circle (CRCL), earn revenue from the interest earned on USDC, which they jointly own. While Armstrong has stated that banning yield on stablecoin could bring profit to his company, it would hurt US customers the most. 

Coinbase stock was down 0.2% in pre-market hours. On Stocktwits, retail sentiment around COIN deteriorated to ‘extremely bearish’ from ‘bearish’, while chatter remained at ‘normal’ levels over the past day. 
CRCL stock has been down over 15% year-to-date.

Read also: Is Bitcoin Becoming A MAG 7–Style Trade As It Decouples From The S&P 500?

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