- Stablecoin yield controversy halts progress on the CLARITY Act, as legislators and companies remain split.
- Coinbase opposes the CLARITY Act bill and questions the yield regulations and DeFi clarity.
- The bill is advanced by lawmakers, but the liability of developers and the yields are not yet determined.
CLARITY Act negotiations remain unsettled as disagreements over stablecoin yields continue to slow the market structure bill, even after the White House and Senate backed an amended proposal. Although the bill has bipartisan support and is moving toward an April 13 markup, its final path remains uncertain as the stablecoin rewards question and DeFi language continue to draw objections from key parties.
Yield Dispute over Stablecoins Extends CLARITY Act Deadlock
Jason Somensatto, policy director at Coin Center, described the stablecoin debate as the main blocker to final passage of the bill. He said that if the issue is resolved, lawmakers could move quickly to settle remaining matters before markup.
Under the current form of the bill, crypto platforms are allowed to provide rewards tied to stablecoins. That approach has drawn concern from banks, which argue that stablecoin yields could pull deposits away from traditional financial institutions.
Cryptocurrency companies have criticized efforts to limit rewards, however, claiming that any such restrictions would stifle innovation in the industry. The White House and Senate recently reached an agreement on an amended proposal addressing this issue.
Under that proposal, crypto service providers would be barred from offering yield on stablecoin balances, either directly or indirectly. Rather than ending the dispute, the change triggered fresh resistance from parts of the crypto industry that had already been divided over the bill’s direction.
Coinbase opposition adds pressure to the debate
The dispute over the stablecoin section has also affected support for the broader legislation. Coinbase, one of the largest crypto companies involved in the policy debate, withdrew its support for the market structure bill in January.
After the Senate released the amended proposal, Coinbase stated that it could not support the bill. That response added to questions about whether the legislation can move forward without stronger backing from major crypto firms.
Tim Scott said full industry support would be necessary for final approval of the market structure bill. His comments reflected the weight that industry alignment now carries as lawmakers prepare for the next stage of consideration.
Even with those objections, Scott pointed to growing political support for the legislation. He said Republicans and Democrats are working together on the matter and added that the White House also agrees with the current direction. His remarks portrayed the bill as having bipartisan momentum, even as key sections remain under challenge.
DeFi protections draw a separate challenge
While stablecoin yields have dominated the latest debate, the CLARITY Act has also come under scrutiny over how it treats DeFi participants and software developers. Senator Cynthia Lummis rejected claims that the bill fails to protect decentralized finance innovators from legal exposure. Responding to criticism from crypto lawyer Jake Chervinsky, she said recent changes made to Title 3 would make the bill the strongest protection for DeFi and developers ever enacted.
Lummis said bipartisan work over the past few weeks had focused on strengthening those protections and argued that the bill must pass in order for those safeguards to take effect. However, the latest revisions she referenced have not yet been made public.
Chervinsky said the DeFi protections issue has received less attention because the stablecoin rewards dispute has dominated discussions. Still, he argued that the language in Title 3 remains a major concern. In particular, he said the latest draft of the Senate Banking Committee could still expose many non-custodial DeFi builders to liability through its money transmitter definitions.
Developer liability concerns remain unresolved
The current draft of the bill includes the Blockchain Regulatory Certainty Act in Section 604. That provision states that non-controlling developers and providers of non-custodial software should not be treated as financial institutions subject to Bank Secrecy Act know-your-customer obligations. Even so, Chervinsky argued that the key issue has not been fully settled.
He said the biggest challenge is making sure non-custodial software developers are not misclassified as money transmitters.
