- According to a report by Eleanor Terrett, a new draft would not ban stablecoin rewards outright but could penalize yield on idle balances.
- Enforcement authority would be granted to the SEC, CFTC and Treasury, with penalties of up to $500,000 per violation per day.
- Exchanges such as Coinbase may be unable to earn yield on passive stablecoin holdings if the proposal is enacted.
The White House reportedly took charge in the latest round of discussions around the crypto market structure bill needed to move forward on the CLARITY Act. While stablecoin rewards won’t be banned outright, there may be penalties for awarding yield on idle balances.
According to a report by Eleanor Terrett, this is a notable change from previous discussions, when crypto and banking executives steered the talks. She said White House Crypto Council Executive Director Patrick Witt introduced a draft text that stated restrictions on stablecoin rewards would be “narrow in scope.”
Anti-evasion language was also introduced to give the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and the Treasury authority to enforce a ban to keep entities from paying out rewards on idle stablecoin balances. The report said civil monetary penalties could be up to $500,000 per violation, per day.
Coinbase Earnings From Idle Balances At Risk
This implies that for crypto exchanges like Coinbase Global (COIN) earning yield on idle balances is effectively off the table. The pending debate now centers around whether firms can offer rewards linked to certain activities. The report also pointed out that the banks’ concerns stem more from competitive pressures than from deposit flight.
Coinbase receives 50% of the interest revenue generated from USDC (USDC)reserves, which Circle invests. This split has been in place since 2023. In the fourth quarter (Q4), Coinbase saw $170 million in stablecoin revenue, which accounted for around 15% of its total revenue. Income from stablecoin exceeded $700 million for the full-year, according to regulatory filings with the SEC.
Ripple CEO Predicts April Win For CLARITY Act
Representatives from Coinbase Global, Ripple (XRP), a16z were among those who attended. Meanwhile, banks did not send individual representatives but were represented through trade associations.
"The dialogue was constructive and the tone cooperative," Paul Grewal, the chief legal officer at Coinbase, wrote on X, saying the sides made "more progress."
Ripple CEO Brad Garlinghouse told Fox Business that he estimates there’s a 80% to 90% change that the CLARITY Act will pass the U.S. Congress by April, echoing similar sentiments shared by Senator Bernie Monero on Wednesday.
Crypto Sentiment Remains ‘Bearish’
On Stocktwits, retail sentiment around two of the biggest stablecoins in the market, Tether (USDT) and USDC (USDC), trended in ‘bearish’ territory over the past day.
Bitcoin (BTC) remained rangebound, edging only 0.5% higher in the last 24 hours to around $67,200. Retail sentiment on Stocktwits around the apex cryptocurrency was also in the ‘bearish’ zone over the past day.
Read also: Arthur Hayes Tells Jerome Powell To ‘Warm Up’ Printer After Blue Owl Freezes Redemptions
For updates and corrections, email newsroom[at]stocktwits[dot]com.