New Draft of the "CLARITY Act": Passive Interest on Holdings Prohibited, Activity Rewards Permitted

On March 24, U.S. Senators announced that cryptocurrency firms and banks have reached a “principled agreement” on the core disputes of the CLARITY Act draft, clearing major obstacles in the legislative process. According to the framework of the agreement, stablecoin holders are prohibited from earning passive income through holding the coins themselves; however, activity-based rewards derived from real behaviors such as payments, DeFi interactions, and platform usage will be permitted to be retained.

Two Core Boundaries of the Draft Framework

The latest draft of the CLARITY Act clearly delineates the mechanisms for stablecoin yields:

Prohibited Items: Any passive income generated solely from holding stablecoins, and mechanisms that are economically equivalent to interest (interest-like returns), are restricted.

Permitted Items: Activity-based rewards related to payment transfers, DeFi platform interactions, subscription services, or trading participation can still be retained, provided that the rewards originate from genuine usage behaviors rather than mere capital holdings.

This framework directly responds to the core concerns of traditional banking—preventing interest-bearing stablecoins from causing large-scale deposit shifts—while also allowing crypto platforms to retain space for innovation through usage scenarios to attract users, creating a relative balance of interests.

Interest Exchange Between Banking and Crypto Industries

This compromise allows both sides to gain on their sensitive issues. The banking sector’s biggest concern—that stablecoins could become a disguised high-yield savings tool—has received a positive regulatory response, with passive interest pathways blocked and the competitive position of traditional deposit services protected.

For cryptocurrency platforms, the retention of activity-based rewards means they can still design incentive schemes tied to usage scenarios to maintain user engagement. However, whether DeFi lending protocols that rely on yield models qualify as “activity-based” remains unclear, and related platforms face significant regulatory restructuring pressures.

The Biggest Concern: How to Define the Boundary of “Activities”

Although a principled agreement has been reached, this compromise does not end disagreements but shifts them to the next core issue: the standards regulators will use to determine “legitimate activities.”

The key wording in the draft—“economically equivalent to interest”—is broad, and legal experts widely expect this term to become a major focus of future regulatory disputes. If the standard is too narrow, current reward schemes may require large-scale adjustments; if too broad, regulatory loopholes could emerge. The SEC, CFTC, and Treasury are expected to issue detailed rules within a year. Until then, the compliance boundaries for stablecoin yield mechanisms remain in a gray area, and industry stakeholders will continue submitting comments on specific provisions.

Frequently Asked Questions

Q: What activity-based rewards are permitted under the CLARITY Act draft?
Under the current draft framework, rewards related to payments, transfers, DeFi platform interactions, subscription services, and trading activities may comply. The exact definitions will be jointly issued by the SEC, CFTC, and Treasury within a year after the bill’s passage. No formal standards are in place yet.

Q: Will DeFi lending protocols be affected by the CLARITY Act?
DeFi lending protocols depend on yield models provided by liquidity providers. If regulators determine these yields as “passive income equivalent to interest,” platforms could face significant operational adjustments. The specific impact will depend on the detailed rules once implemented.

Q: What is the next legislative step for the CLARITY Act draft?
The bill is tentatively scheduled to be submitted to the Senate Banking Committee for review in late April 2026. After approval, it will undergo full legislative procedures, including floor votes and reconciliation with the House version. Before formal passage, the related restrictions are not legally binding.