Stablecoin Yields Survive Despite Failed CLARITY Act

The CLARITY Act, aimed at regulating stablecoins and digital assets, has died in the Senate after failing to garner the necessary votes. Despite its demise, stablecoin holders can still earn yields due to a loophole in existing law.

Changpeng Zhao, former Binance CEO, noted that the technology and yield continue to move forward despite regulatory hurdles. The CLARITY Act would have restricted platform-level stablecoin rewards, but those proposed limits vanished with its failure.

Stablecoins already operate under a separate law called the GENIUS Act, which bars issuers from paying interest or yield directly to token holders. However, this restriction does not apply to platforms, exchanges, and intermediaries that can still pay rewards on stablecoin balances they hold for customers.

Coinbase pays USDC holders 3.5% APY on balances held in its app through a revenue-sharing arrangement with Circle, the issuer of USDC. This arrangement sits outside the GENIUS Act's issuer yield ban and permits affiliate-paid yield.