Reports have come out that Coinbase has once again rejected support for the latest draft of the Clarity Act, underscoring growing industry resistance to proposed restrictions on stablecoin yield.
According to a scoop acquired by Punchbowl News, the cryptocurrency exchange raised concerns with Senate officials over updates to stablecoin yield provisions, marking the latest flashpoint in an ongoing debate over whether stablecoins will be allowed to generate yield. The pushback comes as Clarity Act negotiations in Washington have intensified, with lawmakers attempting to finalise a framework for how stablecoins can be used and incentivized within the broader US financial system.
Crypto journalist Eleanor Terrett shared on Twitter that an internal stakeholder email received by her mentioned that the new Clarity Act proposal would prohibit platforms from offering yield “directly or indirectly” to users holding stablecoins as a reward incentive, akin to bank deposits. At the same time, the proposal carves out a narrower path for activity-based rewards tied to user engagement.
The compromise has already drawn mixed reactions, with some industry leaders warning it could stifle innovation, while others argue it could strike the necessary balance with the traditional banking system.
Coinbase cannot support latest Clarity Act compromise
Coinbase has once again rejected support for the latest Clarity Act compromise, having previously been a key factor in slowing the bill’s progress.
However, the pushback reflects more than just policy disagreement. Stablecoin-related revenue, particularly through its relationship with USDC issuer Circle, has become an increasingly important part of Coinbase’s business model. The company reported average USDC balances of $17.8 billion held on its platform in 2025, underscoring the scale at which stablecoins are embedded into its ecosystem.
Through distribution agreements, Coinbase earns a share of the reserve income generated by USDC, income that can then be passed on to users in the form of rewards. Restrictions on yield would effectively sever that link, limiting both a key revenue stream and one of the platform’s most effective user acquisition tools.
A compromise that bans yield, but leaves the door open to rewards
At the heart of the latest Clarity Act draft is a carefully structured compromise: one that draws a firm line against stablecoins functioning like interest-bearing tokens, while preserving a narrower category of user incentives.
Under the proposed language, digital asset platforms would be prohibited from offering yield on stablecoin holdings “directly or indirectly,” with the restriction applying broadly across exchanges, brokers, and their affiliates. The provision goes beyond a simple ban on interest, targeting any mechanism deemed “economically or functionally equivalent,” a deliberate attempt to prevent firms from replicating yield through alternative structures that move beyond traditional financial institutions.
However, the draft also explicitly permits activity-based rewards, including loyalty programs, promotional incentives, and subscription-style benefits, provided they are tied to user behavior rather than passive holding. In effect, lawmakers are attempting to distinguish between rewarding engagement and recreating deposit-like returns.
Speaking with DeFi Rate, Jamie Green, the COO of Superset, explained the policy intent is clear: “no passive yield.”
“But the boundary between prohibited yield and permitted rewards is still ambiguous, and people disagree on whether that ambiguity is a feature or a bug.”
The draft also directs regulators, the US Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Treasury, to jointly define permissible rewards and establish anti-evasion rules within a year. In practice, Green highlighted, the “economically or functionally equivalent” clause is likely to capture any program that distributes value in proportion to a holder’s balance and the duration of holding, even if it’s branded as ‘rewards,’ ‘points,’ or ‘cashback.’
Ryne Saxe, the CEO of Eco, added that while the draft’s compromise preserves some flexibility, the direction could feel quite restrictive.
“I have no clue how ‘economically or functionally equivalent’ will work, and I fear it can be interpreted to effectively undercut what is permissible under the guise of ‘rewards.’”
Protectionism against the biggest competitive threat
Speaking with DeFi Rate, Eco’s Saxe noted that it does “seem” the crypto industry has “lost the battle on stablecoins as yield-bearing instruments.”
“…I thought there was more optimism from the crypto lobby a week or two ago. Drafter and banking industry lobbyists will chalk this up to ‘competitive fairness.’ But let’s call it what it is – protectionism against the biggest competitive threat they’ve ever faced.”
Saxe’s assessment cuts to the core of the ongoing Clarity Act debate. Stablecoins like USDC or Tether allow users to lend funds with redemption promises, backed by reserves invested in short-dated Treasuries, without the risks and regulatory burdens of traditional banks. In other words, they offer a simpler, more transparent form of narrow banking, exactly the model the banking lobby views as a threat to its deposit base.
“Banks can’t offer unregulated yield products, and there’s been a long-standing concern that stablecoins could replicate deposit accounts without the same oversight. The language around ‘economically or functionally equivalent to interest’ reads like an attempt to ensure that what you can’t do in a bank, you can’t simply replicate on a blockchain,” Simon Jones, the co-founder and CEO of Reya, added.
However, while the results of the new Clarity Act outline would be a framework that reflects two competing industries, by restricting platforms from passing reserve income through to users, the proposal weakens a key mechanism used by issuers and exchanges to drive adoption.
“If distribution partners can’t pass any form of that yield through to end users, issuers lose one of their most effective tools for getting people to hold one stablecoin over another. The business model survives, but the growth playbook has to change,” Simon said.
