U.S. senators are preparing to take up legislation establishing a regulatory framework for cryptocurrency.
Progress on the so-called CLARITY Act had been on hold since January amid a dispute between American banks and crypto companies.
But following a recent compromise between the two sides, the Senate Banking Committee is preparing to hold an executive session on the matter on May 14, Reuters reported.
Crypto companies have been campaigning for this bill, the report added. They say it is vital to the future of the U.S. digital asset space, and needed to address longstanding issues for their business. The legislation would, among other things, define when crypto tokens are securities, commodities or otherwise, providing the industry with legal clarity.
The bill also features a provision designed to settle the dispute between banks and crypto companies. It would outlaw customer rewards on stablecoins, given their similarity to bank deposits. However, rewards on other stablecoin activities, like sending a payment, would still be allowed under this compromise.
“The CLARITY Act compromise reframes stablecoins not as passive savings vehicles, but as transactional tools,” PYMNTS wrote last week.
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“In doing so, lawmakers have drawn a line that preserves the banking system’s core functions while still enabling innovation in digital payments.”
By prohibiting passive yield, the compromise forces crypto companies to reexamine how they attract and retain users. Rather than rewarding holders simply for depositing funds, companies must now offer incentives for activity, such as payments, trading, staking and taking part in decentralized networks.
“For firms like Coinbase, which have relied on stablecoin yield as a revenue driver, the change may be significant,” PYMNTS added. “Yield products have been a key differentiator, especially during periods of low trading volume, and removing that lever could compress margins and push platforms toward more diversified, utility-driven revenue streams.”
Meanwhile, reports from both Reuters and Bloomberg News say that banking trade groups have mounted an eleventh-hour effort to get what they want out of the bill. Per the Reuters report, the industry is trying to win over some Republicans on the Senate Banking Committee.
According to Bloomberg, bank lobbying groups have proposed an adjustment to the compromise, one that completely limits stablecoin issuers from providing any rewards.
In a letter with their proposal, the banking groups wrote that the compromise “includes exceptions that will enable evasion of the intended prohibition and incentive customers to hold and grow stablecoin balances at the expense of deposits.”
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