Stablecoin Bill May Ban Yield Rewards, as per New Crypto Rules

A new U.S. proposal aims to restrict yield and rewards on stablecoins, drawing mixed reactions from the cryptocurrency industry. The draft legislation seeks to prevent stablecoins from offering interest-like returns while potentially allowing limited user incentives, as lawmakers progress toward finalizing stablecoin regulations. Bank representatives are scheduled to review the draft proposal, which could significantly shape the future of stablecoin incentives.

Key Provisions of the Proposal

The draft law, shared with stakeholders, proposes to block platforms such as exchanges and brokers from offering yield for holding stablecoins, whether directly or indirectly. It also prohibits any rewards deemed "economically equivalent" to interest, effectively preventing stablecoins from functioning as savings accounts. This measure aims to establish a clear distinction between traditional banking services and stablecoin operations, as regulators seek to prevent stablecoins from becoming interest-bearing deposit products.

Allowance for Activity-Based Rewards

Despite the restrictions on yield, the proposal may permit activity-based rewards tied to user engagement. These could include loyalty programs, promotional campaigns, or subscription-style benefits, provided they do not function like interest payments. The core condition is that incentives must reward user activity rather than simply holding balances. The U.S. Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and the Treasury Department would be tasked with jointly defining these allowed reward models and introducing anti-evasion rules within one year of the law's adoption.

Industry Reactions and Next Steps

Initial reactions from crypto industry leaders are divided. Some express concern that the proposal is overly restrictive and that the definitions of prohibited rewards remain unclear, fearing stricter interpretations by future regulators. Others view the draft as a balanced approach, believing it offers user protection while preserving promotional and activity-based rewards that drive platform adoption. Bank representatives are expected to review the draft, with potential influence on the final wording by March 25th. Following this review, lawmakers may proceed with formal legislative text, after which regulators will have one year to define permitted rewards.