CLARITY Act Bans Stablecoin Yield
The CLARITY Act's latest version forbids stablecoin issuers from paying passive yield, prompting Coinbase to withdraw support and delaying Senate markup to late January.
The legal architecture creates a deliberate distinction between stablecoins as payment instruments and separate yield products. Consensys lawyer Bill Hughes explained that CLARITY allows stablecoins to be used to earn yield, but draws a bright legal line between 'the stablecoin' and 'the yield product.' The bill adopts the GENIUS Act's definition of 'payment stablecoin,' requiring full backing, par redemption, and settlement use without giving holders any entitlement to interest or profits. The compromise allows companies to offer rewards on activities like transactions, payments, transfers, and DeFi liquidity provision, but bans yield for simply holding stablecoins. This matters significantly for bank partnerships because yield-bearing stablecoins function like deposit alternatives. Banks have successfully lobbied against what they call a 'loophole,' arguing that yield programs could threaten the U.S. financial system by siphoning money from bank deposits. Coinbase, which reported $355 million in stablecoin-related revenue in Q3 2025, withdrew support over these restrictions.
