Coinbase says deal reached on Clarity Act stablecoin yield, clearing path to long-stalled Senate markup

Quick Take

Sens. Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.) finalized the long-awaited stablecoin yield compromise text Friday, with Punchbowl News first reporting the language.
Section 404 of the bill bars crypto firms from paying any interest or yield "economically or functionally equivalent" to a bank deposit, while preserving activity-based rewards tied to “bona fide” platform usage.
Coinbase CEO Brian Armstrong urged the Senate Banking Committee to "mark it up."

Coinbase said on Friday that lawmakers reached a deal on the stablecoin yield provision that has held up the Clarity Act for months, potentially clearing the way for a long-stalled Senate Banking Committee markup.

Sens. Thom Tillis, R-N.C., and Angela Alsobrooks, D-Md., finalized the compromise on Friday evening, ending a fight that had pulled in the White House, the banking lobby, the largest U.S. crypto exchange and the broader digital asset sector since the start of the year. Punchbowl News first reported the text.

The compromise, codified as Section 404 of the bill, prohibits "covered parties" from paying any form of interest or yield to U.S. customers solely for holding stablecoins, or in any manner "economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit."

The text defines covered parties as digital asset service providers and their affiliates, but excludes permitted stablecoin issuers and registered foreign issuers, which are already barred from paying direct interest under the GENIUS Act.

The prohibition does not extend to "activity-based or transaction-based rewards and incentives" tied to bona fide activities. The text directs the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Treasury Secretary to jointly issue rules within one year defining a non-exhaustive list of permitted activities, expected to include payments, transfers, market-making, staking, governance and loyalty programs.

In a meaningful concession to crypto firms that has not been widely reported, the bill provides that permitted activity-based rewards "may be calculated by reference to a balance, duration, tenure, or any combination of the foregoing." That language gives platforms flexibility to design programs that factor in how much a user holds and for how long, so long as the underlying reward is tied to qualifying activity.

"In the end, the banks were able to get more restrictions on rewards, but we protected what matters, the ability for Americans to earn rewards, based on real usage of crypto platforms and networks," Coinbase Chief Policy Officer Faryar Shirzad said on X.

Coinbase CEO Brian Armstrong's response was three words: "Mark it up."

End of months-long stalemate

The deal closes a months-long stalemate that has repeatedly knocked the broader market structure bill off track. The Senate Banking Committee canceled a planned January markup at the last minute after Coinbase pulled its support over an earlier version of the yield language, and the exchange rejected another draft in late March that sent Circle's stock down 20% in a single session.

For Coinbase, the stakes are commercial. The exchange reported $1.35 billion in stablecoin revenue in 2025, much of it from rewards-driven distribution payments tied to its USDC partnership with Circle. Coinbase reports Q1 earnings on May 7.

Beyond the yield prohibition, the new text imposes a slate of additional requirements. Covered parties cannot represent that stablecoins are investment products, are backed by the full faith and credit of the United States, or are FDIC-insured. The Commissions and Treasury must jointly promulgate disclosure rules within one year, and violations carry civil monetary penalties of up to $5 million per violation, assessed by the Treasury Department.

Within two years, the Federal Reserve, OCC, FDIC, NCUA and Treasury must jointly submit a report to Congress analyzing the adoption of dollar-denominated stablecoins, the effect on Treasury yields, and the impact of any compensation paid to U.S. customers on the volume, stickiness, composition and concentration of bank deposits. That provision gives the banking lobby a built-in opening to revisit the issue if deposit flight materializes.

Senate Banking Committee Chair Tim Scott (R-S.C.) has not yet announced a date for a markup. Sen. Cynthia Lummis, R-Wyo., told an audience in March that she expected a markup before the end of April, a timeline that has since slipped.

If the bill clears the Banking Committee, it will need to be reconciled with a competing version from the Senate Agriculture Committee, which passed its own draft along party lines in January, before going to the full Senate floor. Any final Senate bill would then need to be reconciled with the House's version, the Digital Asset Market Clarity Act, which passed 294-134 last July with bipartisan support, before reaching President Donald Trump's desk.

Sen. Bernie Moreno, R-Ohio, warned in March that if Congress fails to pass crypto market structure legislation by May, "digital asset legislation will not pass for the foreseeable future."

Yield was not the only outstanding issue. Tillis, who is not seeking re-election, has also pushed for ethics provisions aimed at preventing the President and other government officials from profiting from the crypto sector, and language around DeFi and illicit finance remains unresolved.