The United States Draws the Line Between Stablecoins and Bank Deposits

A new compromise has emerged in the United States on one of the most contentious issues in crypto market regulation yield on stablecoins. It is an attempt to draw a clear line between bank deposits, which traditionally pay interest, and reward programs that crypto companies offer users for activity on their platforms. This issue matters not only to the cryptocurrency industry. It directly affects the banking sector, consumers, regulators and the future model of digital finance in the United States. If crypto companies are allowed to pay users yield for holding stablecoins without restrictions, such products could begin competing with bank deposits. If the ban is too broad, however, digital platforms will lose some of the tools that help them retain users and encourage the use of their services.

Time for Action examined how the new text of the Clarity Act seeks to protect bank yield while still leaving the crypto industry room to work with reward programs. The compromise text agreed in the U.S. Senate includes a key restriction cryptocurrency companies will not be allowed to offer yield on stablecoins if it is effectively an equivalent of a bank deposit. In other words, a model in which a user simply holds stablecoins on a platform and receives interest solely for keeping the asset there is set to be banned. This is an important point for the banking sector. Banks have long insisted that crypto companies should not create products that, in economic substance, resemble bank deposits, while avoiding the same level of regulation. For banks, this is not only a question of competition, but also of financial system stability. Depository institutions operate under stricter rules, are subject to supervision, must meet capital requirements, have deposit insurance and carry responsibility toward clients. If crypto companies can offer a similar product without the same restrictions, the rules of the game become uneven. That is why the new text stresses that depository institutions provide financial services that are an important part of the strength of the American economy. Lawmakers are effectively acknowledging that if stablecoin issuers begin to perform a similar role without clear rules, this could hinder the work of banks and change the balance in the financial market.

At the same time, the compromise does not close off all reward options for crypto companies. This is the main concession to the crypto industry. The new text allows incentives connected to bona fide activity or real transactions. In other words, a reward may remain legal if it is not a hidden interest payment for the passive holding of stablecoins. This changes the logic of such products. The “buy and hold” model becomes problematic. The “buy and use” model, by contrast, may remain permitted. A user may receive a reward not for the mere fact that a stablecoin sits on a balance, but for specific activity: transactions, participation in the platform’s work, use of services or participation in loyalty programs.

For the crypto industry, this has practical significance. Companies will have to review the structure of their reward programs more carefully. If they previously could build a product around passive yield, that approach may now create regulatory risk. To remain within the permitted zone, the reward must be tied to user action, not to the stablecoin balance itself. The largest market players have already treated the compromise as acceptable. For Coinbase, this issue was especially sensitive, because the company could have suffered significantly from a full ban on stablecoin rewards. The public reaction from the company’s leadership shows that the new text is not seen by the crypto market as a catastrophe. On the contrary, it leaves room for adapting business models.

Coinbase Chief Legal Officer Paul Grewal said this language “preserves activity-based rewards tied to real participation in crypto platforms and networks, which is exactly what the bank lobby said they wanted.” This wording clearly reflects the position of the crypto market: if a reward is not a copy of a bank deposit, it should not be banned. For digital asset companies, reward programs are not only a way to offer users additional value. They are also a tool for developing the ecosystem, encouraging payments, transactions, platform interaction and competition with traditional financial services.

But this is where the greatest uncertainty remains. The new text of the law sets out the general principle, but does not give a final answer to all practical questions. After the law is enacted, the U.S. Treasury Department and the Commodity Futures Trading Commission must begin drafting rules within a year that will define more precisely when crypto companies may offer rewards and in what form. This means the real boundaries of what is permitted will become clear not at the moment the law is passed, but during the regulatory rulemaking stage. That is where it will be decided which programs qualify as bona fide transaction-based rewards, and which are attempts to circumvent the ban on deposit-like yield. The text provides that regulators will be able to consider balance, duration and term as factors when assessing rewards. The nature of user activity and the existence of a specific incentive program will also matter. This is important because even a program formally tied to activity may effectively operate as a deposit product if the main source of the reward remains the passive holding of stablecoins. That is why the document includes language aimed at preventing evasion. Lawmakers are trying not only to ban obvious analogues of deposits, but also to avoid leaving a broad opportunity to disguise them as bonuses, loyalty programs or technical rewards. For banks, this is fundamental, because without such protection, crypto companies could change the name of the product while leaving its economic substance unchanged.

At the same time, an overly broad interpretation of the ban would also be dangerous for crypto companies. If regulators begin to treat almost any reward as hidden yield, this could limit product development and reduce the competitiveness of digital platforms. That is why the future rules will be no less important than the legislative compromise itself. Politically, this compromise has another significanc: it may unlock further movement of the Clarity Act in the Senate. The issue of stablecoin yield had remained one of the main sources of tension between the banking and cryptocurrency industries for several months. Because of this, a Senate Banking Committee session on the broader crypto market structure bill had previously been postponed.

Now that Senators Thom Tillis and Angela Alsobrooks have agreed on compromise text, the bill has a better chance of moving to the next stage of consideration. This does not mean that all disputes have already been resolved. There are still many unresolved issues in digital asset legislation. But one of the most contentious topics appears to have received a formula that both sides can accept. For banks, this is a way to protect their core function. They preserve their advantage in deposit products and receive confirmation that stablecoins should not turn into a parallel banking system without appropriate regulation. For crypto companies, it is an opportunity to preserve reward programs, but in another form through activity, transactions and real use of platforms. For consumers, the situation is more complex. On one hand, a ban on deposit-like yield may limit some attractive offers. On the other, it is meant to protect users from products that look like safe analogues of bank deposits, but do not have the same level of guarantees and supervision. In financial products, the difference between a “reward” and “interest on a deposit” may look technical, but for client risks it matters significantly.

Stablecoins were created as digital assets whose value is tied to stable currencies or other reserves. They are widely used in the crypto ecosystem for payments, transfers, trading and preserving value between operations. But when yield products begin to be built around stablecoins, they move closer to the territory of traditional finance, where the rules are much stricter. This is the line that has now become the subject of a struggle. Banks do not want crypto companies to take deposit business from them under another name. The crypto industry does not want to lose the ability to reward users and develop its own platforms. Regulators, for their part, have to create rules that prevent circumvention of the law, but do not stop legal forms of innovation. The compromise in the Clarity Act does not close the debate, but moves it to the next level. The main question now is not whether crypto companies can pay rewards at all. The question is what exactly they are paying for passive holding of stablecoins or real user activity. This distinction will become decisive for the future of the market. If a company pays for a balance, this may be viewed as an analogue of a bank deposit. If the reward is connected to transactions, use of services or a loyalty program, it has a better chance of remaining within the permitted zone. But the final line will be drawn not by the companies themselves, but by regulators.

In a broader sense, this story shows that American crypto regulation is gradually moving from general debates to specific rules. Lawmakers are no longer simply arguing about whether digital assets need restrictions. They are trying to determine which products represent a new form of financial activity, and which are effectively copying banking services without banking supervision. That is why the compromise on stablecoin yield may become an important stage in shaping the future of the U.S. financial market. It does not give a full victory to either banks or the crypto industry. Banks receive protection from direct competition in deposits. Crypto companies preserve the ability to create rewards. Regulators receive broad powers to clarify the rules. This decision looks like an attempt not to break the development of digital finance, while also not allowing it to bypass the basic rules of the banking system. It is between these two tasks that the main line of the American approach to stablecoins is now being drawn.