- Key insight: The section of the bill addressing stablecoin rewards is the product of a hard-won bipartisan compromise. Efforts to reword it would not only create confusion, but would seriously endanger its passage.
- What's at stake: By establishing clear federal standards, CLARITY gives institutions durable certainty that they can engage with modern financial infrastructure without fear of shifting, enforcement-led regulation.
- Supporting data: The FDIC's 2026 Risk Report found bank deposits grew about 3.9% in 2025, and community bank deposits grew faster, near 5%.
Financial regulation should serve a higher purpose: protect consumers, expand choice, and fuel economic growth — not erect regulatory moats or shield incumbents from fair competition.
As Congress works to finalize the
While presented as minor technical adjustments, recent eleventh-hour proposals would likely kill the bill by undoing a clear, careful, and intentionally negotiated compromise and replacing it with an amorphous standard that would hurt consumers, competition, innovation, and market access.
For starters, the GENIUS Act set a clear baseline: Stablecoin issuers may not pay interest or yield to holders. CLARITY goes significantly further by expanding the prohibition to virtually all digital asset businesses. At the same time, CLARITY, like GENIUS, recognizes that stablecoins are meant to give Americans a new, competitive form of payments that expands choice and drives better consumer outcomes. Activity-based rewards remain critical to this goal as it incentivizes merchants, businesses and consumers alike to use stablecoins. To that end, section 10404 draws a bright line between passive, deposit-like yield, which is strictly prohibited, and permissible activity-based incentives tied to economic activity (e.g., transactions, product use, or merchant discounts).
Some incorrectly assert a platform could pay a customer a flat monthly amount that rises with the holding balance without violating the prohibition. No, it could not. Section 10404 does not turn on labels. Rather it bars any arrangement economically or functionally equivalent to interest on a bank deposit, which is exactly what a reward that scales with an idle balance would be. This prohibition reaches every digital asset service provider and its affiliates, covers both direct and indirect payments, authorizes strict anti-evasion rules, and carries penalties up to $5 million per violation. The language permitting a lawful reward to be measured by reference to a balance or duration applies only to rewards that already pass the "economic or functionally equivalent" test.
Furthermore, suggestions to strike "solely" and swap "economically or functionally equivalent" with "substantially similar" subtract clarity rather than adding it. Such changes would trade section 10404's precise standard for an elastic one without meaningful limits to keep the ban tied to its purported deposit flight policy rationale. We all should be wary of last-minute proposed changes that are more likely to invite shifting interpretations and case-by-case litigation, rather than a hard-coded bright-line rule. The purpose of CLARITY is, after all, to provide regulatory clarity.
There is a clear difference between activity-based incentives and deposit interest. If we treat them the same, we misunderstand how payment tools actually work.
Stablecoins are payment transaction instruments, not savings accounts. Credit card companies routinely offer cash-back and points to reward transacting with your card. Prohibiting digital asset platforms from doing the same simply because the activity involves digital dollars denies American consumers the benefits of healthy competition, only to protect entrenched intermediaries.
Read more:
OCC and FDIC finalize narrower bank supervision procedures As education costs rise, credit unions chip in for employees A $111 million scheme to keep bad merchants banked How Google and Apple's youth plays are pressuring banks
There is also a national interest and priority that is being overlooked. Under GENIUS, stablecoin issuers hold short-dated Treasuries to back their coins. Indeed, a $1 stablecoin is
The case for tightening rewards rests on a fear that consumers will move savings out of local banks and into stablecoins. The evidence, however, does not support it. Digital asset businesses may already pay activity-based rewards, but if migration were a real danger, it would show in the data. The FDIC's 2026 Risk Report found bank deposits grew about 3.9% in 2025, and community bank deposits grew faster, near 5%. The White House Council of Economic Advisers found that eliminating stablecoin yield entirely would move lending by a rounding error: total lending up 0.02%, community bank lending up 0.026%.
Far from somehow harming the financial system, CLARITY delivers real, structural benefits for banks. By establishing clear federal standards, CLARITY gives institutions durable certainty that they can engage with modern financial infrastructure without fear of shifting, enforcement-led regulation. In fact, CLARITY's banking title affirms that banks may utilize blockchain technology and engage in digital asset activities, including custody, staking, and facilitating payments, while preserving existing primary federal supervision. CLARITY also ensures a level playing field by confirming digital asset intermediaries must abide by the Bank Secrecy Act, anti-money-laundering rules and U.S. sanctions laws. These are hard-won gains, and they sit in the same bill, on the same vote, as the rewards provision.
That is why relitigating a settled compromise weeks before a vote is actually a detriment and risk to banks, not a benefit. It stalls the entire framework, leaving consumers without robust federal protections and banks without regulatory certainty. It would not even secure the stricter rewards restrictions its proponents seek.
If CLARITY does not pass, Section 10404 does not exist, and the GENIUS status quo, which permits broader third-party rewards than CLARITY would, remains in full force. Rewards restrictions are unlikely to pass through any other legislative vehicle, making CLARITY banks' last best chance to limit stablecoin-linked rewards.
American financial leadership has always thrived on competition and progress. Rather than restrict consumer choice, we should welcome clear guardrails that lower costs, foster innovation, and keep our financial system open, competitive, and secure. The framework is written and the work is done. It's time to pass CLARITY.
