CLARITY Act Could Stop Platforms Acting Like Banks – But Rewards Stay

Crypto and bank representatives convened again on Capitol Hill this week to review the latest legislative text outlining a compromise between the two groups after months of discussions.

The meeting continues previous talks on whether the former should be allowed to offer its customers rewards from their stablecoin holdings.

Proposed Rules Will Allow For Activity Rewards

Crypto journalist Eleanor Terrett shared details from the session via social media, stating that the latest proposal would explicitly bar crypto platforms from offering stablecoin rewards to their customers, whether ‘directly or indirectly,’ or in any form that resembles a bank deposit.

Per sources cited by Terrett, the restriction would result in a broad industry-wide ban that applies to all digital asset service providers and their affiliates. This measure would close any potential loopholes in the proposed legislation and prevent these platforms from introducing anything ‘economically or functionally’ similar to interest-earning stablecoin offerings.

On the other hand, the new rules will allow activity-based rewards linked to user engagement on the condition that they are not considered as interest. This will cover activities like loyalty, promotional, and subscription programmes.

Additionally, the new guidelines require regulators like the U.S. Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and the U.S. Treasury to jointly define what qualifies as permissible rewards and to establish other rules that will enforce them.

Industry Reactions

In her X post, the crypto journalist shared feedback she had received from industry participants who had reviewed the draft text.

One individual pointed out how the new proposal’s content was very different from what had been discussed by the White House in previous meetings. According to them, the ‘economic equivalence’ standard is also very vague and could give regulators room to interpret it strictly.

The source also raised concerns about how some provisions could limit the way in which rewards are tied to balances or transaction volumes. Crypto platforms, as a result, would have a harder time coming up with incentive structures. Overall, they outlined that the new proposal is narrower and more restrictive.

However, another industry player believes that the draft is mostly in line with expectations and offers a fair compromise. They further explained that it still allows for transaction-based rewards while preventing stablecoins from functioning like interest-bearing deposit accounts.

Terrett’s source also believes that the update represents the best possible outcome under the circumstances. This is because a previous version, the Tillis-Alsobrooks proposal, would have imposed more restrictive guidelines. Meanwhile, she has also revealed that bank representatives will be reviewing the text this week.

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