CLARITY Act stablecoin rewards line faces 360-day rulemaking test

Senate Bill 404 bans stablecoin yield "economically or functionally equivalent" to bank deposit interest while permitting activity-based rewards — a distinction the bill never defines, leaving a 360-day joint SEC and CFTC rulemaking to fill the gap.

"The central question is whether a reward is 'economically or functionally equivalent' to interest on a bank deposit, a test the bill never defines," Ryan Chan-Wei, research fellow at the Cato Institute, wrote in a letter to the Wall Street Journal. "The bill names loyalty programs both among the rewards it permits and among those it forbids."

The Senate Banking Committee advanced the bill 15-9 on May 14. The U.S. Treasury estimates $6.6 trillion in bank deposits are at risk from stablecoin disintermediation, with Standard Chartered projecting up to $500 billion in migration by 2028. Coinbase generated $1.35 billion in stablecoin revenue in 2025 — 19 percent of total revenue, up 48 percent year-over-year — through a 50/50 reserve-income split with Circle that passes yield to USDC holders at up to 3.50 percent APY.

The Senate filed a procedural motion August 8 for a September floor vote after missing the pre-recess deadline. Polymarket odds for 2026 passage have collapsed from 82 percent in February to roughly 15 percent as of August 8. Sixty votes are needed for cloture when the Senate returns September 14.

Banking lobby's counter-move

The American Bankers Association, the Bank Policy Institute, and the Independent Community Bankers of America formally rejected the compromise on May 8, arguing that activity-based rewards are economically identical to deposit interest. BPI frames the carveout as an on-ramp for the full $6.6 trillion. Senator Reed has filed an amendment to tighten it.

The banking industry's counter-strategy does not depend on the bill's outcome. The Clearing House consortium — JPMorgan, Bank of America, Citi, Wells Fargo, and 11 others — is building a shared tokenized deposit network targeting the first half of 2027. Wells Fargo is pursuing a dual-track strategy: a proprietary platform launching Fall 2026 alongside the consortium effort.

What the 360-day rulemaking decides

The SEC and CFTC will determine what counts as a "bona fide" activity, what falls under "economically equivalent," and where the Circle-Coinbase revenue-sharing model sits relative to the prohibition. Chanté Eliaszadeh's analysis at Astraea Counsel frames the choice precisely: design to the narrow reading and accept lower near-term reward economics, or design to the broad reading and accept a 35-to-45 percent probability of a conference-driven rebuild.

Meanwhile, the SEC votes Friday, August 14, on proposing Regulation Crypto — a purpose-built offering regime that would mark the agency's first major crypto rulemaking under Chair Paul Atkins. The proposal grew out of Project Crypto, with planks including registration exemptions for token sales, safe harbors for decentralizing projects, and custody standards for broker-dealers. "Statute is the way to future-proof something," Atkins told CNBC in late July.

The functional line in Section 404 determines whether stablecoins compete with bank deposits or complement them. If the carveout holds, Coinbase keeps its revenue architecture and stablecoin issuers build activity-reward products. If it tightens to a House-style near-total yield ban, the competitive surface collapses into pure payments — and the Clearing House consortium's tokenized deposits capture the interest-bearing layer banks have always owned. The next material signal is the September cloture vote.

This article is for informational purposes only and does not constitute investment advice.