US Lawmakers Propose Ban on Stablecoin Interest to Protect Traditional Banking

Senators Thom Tillis and Angela Alsobrooks have released a compromise text for the Clarity Act that would strictly limit how stablecoin issuers can incentivize users. The proposed language explicitly bans the payment of interest or yield based solely on the holding of payment stablecoins, whether paid in cash, tokens, or other considerations. The legislation is designed to shield traditional banks from direct competition. By prohibiting yield that is economically or functionally equivalent to bank deposits, the bill ensures that stablecoins do not disrupt the funding mechanisms of the American banking system, which the text describes as integral to the strength of the economy. Under the proposed rules, issuers are barred from offering yield on balances; however, the text carves out a specific exception for incentives based on bona fide activities or transactions. This allows stablecoin firms to structure rewards programs similar to those offered by credit card companies, though loyalty programs remain restricted. The Digital Chamber has welcomed the release of the language, viewing it as a critical step toward a full committee markup. While the restrictions limit the ability of stablecoins to act as interest-bearing savings vehicles, the resulting regulatory clarity may provide a more stable environment for institutional adoption and innovation within the digital asset ecosystem.