U.S. Clarity Act Talks Stall as Stablecoin Yield Debate Grows

Negotiations around the U.S. crypto market structure legislation, known as the Digital Asset Market Clarity Act, are once again centering on a familiar issue: whether crypto firms should be allowed to offer yield on stablecoins.

According to conversations with industry sources shared by journalist Eleanor Terrett, the debate has placed significant focus on Thom Tillis, the Republican senator from North Carolina whose position could prove pivotal when the bill returns to the Senate Banking Committee.

Yield debate puts spotlight on Tillis

The yield question has been a sticking point since earlier drafts of stablecoin legislation were being prepared for markup by the Senate Banking Committee. At the time, amendments introduced by Tillis and Angela Alsobrooks sought to restrict the scope of rewards that crypto firms could offer on stablecoin holdings.

Those provisions drew pushback from parts of the crypto industry. In January, Coinbase cited the amendments among the reasons it withdrew support for the proposed legislation.

Now, after weeks of negotiations involving banks, crypto companies, and the White House, a new legislative text has reportedly been shared with Tillis’s office. Sources familiar with the discussions say his team has been meeting with both industry representatives and administration officials in recent days.

Participants involved in the talks described the discussions as “moving in the right direction,” though a final compromise has yet to emerge.

A compromise rather than full alignment

Industry participants say the process is unlikely to produce a sweeping agreement between traditional financial institutions and the crypto sector.

Instead, negotiators appear to be working toward language that reflects the minimum terms both sides can accept, allowing the legislation to move forward.

Cody Carbone, CEO of The Digital Chamber, said Senator Tillis has been receptive to industry outreach. “Sen. Tillis has been very receptive to our discussions about stablecoin yield. I am optimistic we will find a way to get to a “yes” vote on the bill, and we appreciate his work to try to advance market structure rules of the road.”

The outcome of those discussions could determine whether the Senate Banking Committee resumes progress on the bill in the coming weeks.

Passage possible without democratic support

Even if no Democrats support the measure during the next markup of the Clarity Act, the bill could still advance along party lines. However, Tillis’s vote is widely viewed as critical in that scenario.

Meanwhile, several stakeholders say the debate over stablecoin yield has overshadowed other unresolved elements of the legislation.

DeFi concerns remain unresolved

Participants involved in negotiations say the yield issue has “taken a lot of oxygen out of the room,” leaving other complex areas, particularly those related to decentralized finance (DeFi), largely unaddressed.

One DeFi industry leader involved in the discussions suggested that Senate Democrats are now scrambling to tackle those remaining concerns.

Ethics questions surrounding crypto regulation are also expected to remain an important consideration for some Democratic lawmakers.

Despite the delays, industry representatives remain cautiously optimistic that progress could materialize soon. One crypto trade executive said the next three weeks will likely determine whether lawmakers can resolve key issues surrounding yield and rewards in time for the Banking Committee to schedule a markup in late March.

U.S. regulators clarify capital rules for tokenized securities

Separately, U.S. banking regulators have issued new guidance clarifying how banks should treat tokenized securities under capital rules.

The guidance was jointly released by the Office of the Comptroller of the Currency, Federal Reserve, and Federal Deposit Insurance Corporation.

In a set of frequently asked questions, the agencies stated that eligible tokenized securities should generally receive the same capital treatment as their traditional, non-tokenized equivalents.

A security is commonly described as “tokenized” when ownership rights are represented using distributed ledger technology.

Technology-neutral approach

Regulators emphasized that the capital framework is designed to be technology-neutral, meaning the underlying technology used to issue or transact in a security does not typically alter its regulatory treatment.

“The capital rule is technology neutral, and the technologies used to issue and transact in a security do not generally impact its capital treatment,” the agencies said.

The clarification marks a notable shift from previous regulatory attitudes during the administration of former President Joe Biden, when regulators often viewed permissionless blockchains as carrying higher risks compared with permissioned systems.

Under the updated guidance, tokenized securities will be treated the same as traditional securities when it comes to capital requirements.

At the same time, banks holding these assets will still need to follow proper risk management practices and comply with all relevant laws and regulations, the agencies said.

What it means for banks and tokenization

The clarification could give banks more clarity as they look at blockchain-based financial instruments. By saying that tokenized securities fall under the same capital framework as traditional ones, regulators are essentially making it clear that the technology used does not change how these assets are treated under capital rules.

While the guidance does not give banks new permissions to issue or hold tokenized assets, it does remove some of the uncertainty that previously existed around their regulatory treatment.

Also Read: Senator Lummis Meets CFTC Chair Selig to Discuss Crypto Market

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