A new challenge is emerging for stablecoin rewards programs as the Senate Banking Committee prepares to mark up the Digital Asset Market Clarity Act (CLARITY Act) on January 15, 2026. The bill's provisions on stablecoin rewards are facing intense scrutiny from both the crypto industry and traditional banking. The central debate revolves around what qualifies as a permissible stablecoin "reward" and who is authorized to provide it.
The draft CLARITY Act differentiates between rewards earned through active use and passive interest earned simply from holding stablecoins. It aims to ban passive stablecoin yields while allowing rewards tied to on-chain activity like trading, staking, providing liquidity, or posting collateral. This compromise seeks to strike a balance between the concerns of banks and the desire of crypto firms to foster innovation. Banks have argued that offering rewards on idle stablecoin balances could blur the line between stablecoins and traditional bank deposits. Crypto firms, on the other hand, have warned that restricting incentives might hinder innovation.
Under the draft, stablecoin issuers and platforms can offer rewards for activities such as payments, transfers, remittances, the use of wallets, exchanges, and blockchain networks, as well as participation in governance and network operations. Loyalty programs, promotional perks, and rebates are also covered. However, the bill establishes a firm boundary by prohibiting interest or yield for merely holding a payment stablecoin, regardless of whether the rewards are distributed in cash, tokens, or other assets.
The question remains whether the CLARITY Act will narrowly define the ban on issuer-paid yield or extend it to any entity in the distribution chain. Coinbase, for example, might reconsider its support for the CLARITY Act if the bill's language moves beyond disclosure requirements to outright restrict rewards. This indicates that the crypto industry's pro-crypto coalition is testing its limits as regulatory text becomes more specific.
The GENIUS Act, now Public Law 119-27, established a payment stablecoin framework and included an issuer-level prohibition: permitted stablecoin issuers cannot pay holders interest or yield solely for holding, using, or retaining the stablecoin. The logic was clear, as payment stablecoins should function as money, not deposit substitutes competing with regulated banks. However, GENIUS left open the question of what happens when platforms, exchanges, or affiliates offer rewards funded from their own revenue or structured as loyalty incentives rather than direct yield pass-throughs.
The Blockchain Association-led coalition argues that the law bans issuer-paid yield while preserving the ability of platforms and third parties to offer lawful rewards and incentives. They warn that expanding the ban would reduce competition, inject uncertainty early in implementation, and penalize exchanges for using their own capital to drive adoption.
The potential impact of these regulations is substantial. Stablecoins registered $33 trillion in transaction volume in 2025, a 72% year-over-year increase, with USDC and Tether accounting for the majority of flows. Coinbase reported $355 million in stablecoin revenue in the third quarter of 2025 and described rewards as a driver of USDC growth, with average USDC balances in Coinbase products around $15 billion during that quarter. The outcome of the Senate's deliberations could significantly shape the future of stablecoins and the broader crypto industry.
The Senate Agriculture Committee has postponed broader markup until the final week of January.
