Stablecoins face yield curbs as US bill talks continue

Automatic interest on idle stablecoin balances would be banned

A draft of the Cryptocurrency Market Structure Bill (the CLARITY Act) is being discussed that would prohibit automatic interest accrual on idle stablecoin balances. The core change targets passive, time-based returns credited to users without any qualifying activity.

According to journalist Eleanor Terrett, the draft would differentiate between prohibited idle-balance interest and narrowly permitted, activity-tied rewards. The legislation remains fluid, with negotiations active among policymakers, crypto firms, and traditional finance stakeholders.

Why the stablecoin interest ban matters now

The white house recently led discussions narrowing the scope to ban idle-balance interest while considering limited rewards, with enforcement under federal agencies such as the SEC, CFTC, and Treasury, as reported by Stocktwits News. That places payments-like use cases in one lane and bank-like interest offerings in another.

Early readouts indicate steep deterrents are under consideration before the text is finalized. “Penalties could reach up to $500,000 per day per violation,” according to ChainCatcher.

Industry perspectives remain divided. Coinbase leadership has argued that permitting interest aligns stablecoins with mainstream financial options where cash earns yield, as reported by CNBC.

Risk supervisors have emphasized prudential concerns. federal reserve Governor Michael Barr has warned that the chase for yield can push issuers toward less-liquid reserves, heightening vulnerabilities, as covered by CoinDesk.

If enacted as described, platforms would need to remove automatic APY on idle stablecoin balances and recast benefits as conditional rewards tied to specific actions. Disclosures would need to separate payment functionality from any return-generating features.

Compliance programs would likely focus on anti-evasion controls, including monitoring for hidden or indirect interest schemes. Expect heightened scrutiny of marketing language, reward triggers, and the treatment of omnibus or custodial accounts.

DeFi and wallet providers may reassess integrations that auto-credit earnings on stablecoins without user activity. Clear separation between staking-like services, payment rebates, and custodial interest will be essential to avoid misclassification risks.

At the time of this writing, Coinbase (COIN) traded at $169.91, up 2.39% intraday, based on data from Yahoo Scout. Market moves reflect evolving expectations but do not imply outcomes for any single proposal.

What’s allowed versus banned in the CLARITY Act draft

Allowed: limited, activity-tied stablecoin rewards

The draft contemplates narrowly defined rewards triggered by user actions, such as merchant discounts, transaction-based rebates, or usage streaks. These incentives must not resemble time-based interest or guarantee an APY for passive holding.

Banned: automatic interest on idle balances

Automatic interest accrual, programmatic crediting of returns solely for holding a stablecoin balance, would be prohibited. That includes passive yields in custodial, exchange, or wallet accounts absent user activity.

FAQ about stablecoin interest ban

Are merchant or activity-based rewards still allowed under the CLARITY Act draft, and how are they defined?

Yes, but narrowly. Rewards must be triggered by specific actions, purchases, transfers, or defined on-platform activity, not by time or passive holding. Guaranteed APY on idle balances remains outside scope.

Who would enforce the ban and what are the potential penalties for violations?

Federal market and treasury regulators are contemplated as enforcers. Reports have cited penalties as high as $500,000 per day, per violation, subject to final legislative language.