Coinbase (NASDAQ:COIN) is backing a Senate compromise on stablecoin rewards that could revive the CLARITY Act after months of stalemate.

The Stablecoin Rewards Compromise

The new language bans rewards on stablecoins if they are “economically or functionally equivalent” to bank deposits while preserving incentives tied to actual crypto platform activity.

The Treasury Department and CFTC would issue a rulemaking to determine that equivalency standard. 

The rulemaking would address specifics of what crypto companies’ rewards and staking programs need to include to pass the threshold.

This provision addresses one of the main issues that stalled the bill in the Senate: whether crypto firms can reward users for holding stablecoins. 

Banks warned that stablecoin rewards could pull deposits away from regulated lenders if users can earn yield-like rewards on dollar tokens through crypto platforms.

Why Banks And Crypto Firms Were Fighting

Banks argued that offering stablecoin yield could drain deposits from the banking system. If users can earn rewards on dollar tokens, some funds may leave bank accounts and move into stablecoins.

Crypto firms countered that rewards can be tied to actual platform activity rather than passive interest. 

Exchanges and digital asset companies use incentives to support trading, payments, staking, wallet activity, and other services built around stablecoins.

The new language separates passive, yield-like payments from incentives tied to actual crypto activity. 

Rewards that resemble bank deposit interest face tighter restrictions. Rewards linked to user activity could still be allowed, depending on how regulators define permitted activities.

Coinbase Gets What It Needs

Coinbase Chief Policy Officer Faryar Shirzad explained that banks secured more restrictions on rewards, but crypto firms protected what matters: the ability for Americans to earn rewards based on real usage of crypto platforms and networks.

For Coinbase and other platforms, stablecoin rewards are commercially important. 

They help attract users, support USDC activity, and keep dollar liquidity inside crypto platforms. For banks, the same rewards look like direct competition for customer balances.

What The CLARITY Act Does

The CLARITY Act is one of the main U.S. efforts to create federal rules for digital asset markets. 

The bill clarifies how regulators oversee crypto markets, determines which tokens fall under securities or commodities rules, and defines how federal agencies divide responsibility.

The bill would also give the CFTC a larger role in supervising parts of the digital asset market. 

The stablecoin rewards provision was one of the clearest obstacles because it pitted banks and crypto firms against each other.

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