US Senate leans toward banning stablecoin interest payments as “holding rewards” … emerging as a key flashpoint in the market structure bill

As the US Senate’s proposed amendments to the digital-asset (cryptocurrency) market structure bill known as the “CLARITY Act” include a plan to ban “interest for holding” stablecoins, regulation of reward structures is emerging as a central issue.

According to CoinDesk on the 23rd (local time), the Senate, in a recent draft shared with the industry, indicated it would prohibit structures that pay interest simply for holding stablecoins. The aim is to curb yield models that resemble bank deposits.

However, a compromise that would allow certain user activity-based rewards programs is said to be under discussion. With specific standards and how they would be applied not yet clearly defined, the industry says uncertainty remains.

The amendment is widely seen as a compromise forged amid conflicting interests between the banking sector and the digital-asset industry. Banks have strongly opposed stablecoin interest models, arguing they could substitute for deposit functions.

The CLARITY Act is a key piece of legislation to overhaul the overall digital-asset regulatory framework and has previously passed the House and undergone review by some Senate committees. Still, debates continue over major issues including stablecoin reward structures, DeFi regulation, and provisions to prevent conflicts of interest involving public officials’ digital-asset holdings.

Market participants expect that, if the bill passes, institutional investor participation will expand and the integration of the digital-asset market into the regulated mainstream will accelerate.