A newly released section of the proposed Digital Asset Market Clarity Act would prohibit stablecoin yield that accrues solely from holding reserves, setting the stage for a Senate Banking Committee markup and intensifying industry focus on how activity-based rewards are defined, monitored, and delivered across crypto platforms. The compromise language, negotiated by U.S. Senators Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.), mirrors discussions circulating since early this year and positions depository institutions’ core functions as distinct from services that stablecoin issuers might otherwise seek to replicate.

Market Impact

The text targets interest-like returns on payment stablecoin balances, aiming to draw a clear line between bank deposits and crypto rewards. It asserts that depository institutions underpin the U.S. economy and warns that stablecoin issuers offering comparable interest could inhibit those institutions. In practical terms, the draft would bar a “covered party” from paying interest or any form of yield—whether in cash, tokens, or other consideration—when it is tied only to a customer’s passive holding of payment stablecoins or when it is economically or functionally equivalent to interest on a bank deposit.

At the same time, the proposal preserves room for incentives built on “bona fide activities or bona fide transactions” that are different from deposit-like interest. That distinction aligns rewards more closely with participation and usage rather than mere balance size. The text specifies that loyalty programs or similar efforts would fall within the restriction, underscoring an intent to limit structures that look or feel like deposit rewards by another name.

Industry participants expect this to push firms away from a “buy and hold” approach to a “buy and use” model. One crypto company representative characterized the likely shift as a move toward rewards that hinge on genuine on-platform or on-network activity, not simply on the duration or size of a customer’s stablecoin balance. While the precise contours are uncertain, the emphasis on usage could reshape how platforms design incentives, calculate eligibility, and disclose program terms.

AI Integration

As platforms adapt to activity-driven designs, the operational challenge will be sorting permissible “bona fide” behaviors from prohibited interest-like payouts. Crypto services frequently rely on algorithmic systems to analyze transactions, identify participation patterns, and manage risk. Within that toolkit, AI can play a role in classifying behaviors, measuring engagement signals, and maintaining guardrails that separate legitimate rewards from structures that might be “economically or functionally equivalent” to bank interest.

For example, models used to assess activity may parse factors such as transaction frequency, the types of on-chain interactions that constitute real participation, and the extent to which reward formulas weight balance, duration, or tenure. The draft’s reference to these attributes raises the stakes for accurate measurement and documentation. AI-enabled analytics can assist in interpreting complex behavioral data at scale, helping platforms verify that a program’s primary driver is activity—not passive balance—while producing evidence suitable for regulatory scrutiny.

Anti-evasion provisions in the text further elevate the need for monitoring. Systems designed to detect attempts to route around the rules will likely scrutinize how rewards are triggered and whether incentive structures indirectly reconstitute interest-like returns. In that setting, machine-driven surveillance, anomaly detection, and programmatic controls can help firms maintain compliance and demonstrate that rewards are anchored to legitimate participation rather than balance-derived yield.

Technology Use Case

Translating the legislative language into operational practice will require end-to-end technical workflows. Platforms may need scoring frameworks that link rewards to concrete user actions, evidence logs that document qualifying transactions, and configurable policies that adapt as rulemaking clarifies boundaries. AI-powered classification and scoring can support these tasks by dynamically distinguishing between activities that meet the letter of the law and those that risk collapsing back into prohibited interest.

At the same time, traceability becomes a design priority. Firms will need to explain why a given user earned a reward, which activities counted, and how calculations treated balance, duration, and tenure. Systems that combine deterministic rules with AI-assisted judgment can provide structure and flexibility, while audit trails help satisfy oversight. Because loyalty-style constructs are expressly covered by the restriction, developers must ensure that brand or marketing layers do not mask interest-like economics. Technical governance—policy checks, version control for reward algorithms, and continuous monitoring—can reduce the risk of accidental noncompliance.

Legislative Path

The release of the compromise language clears a key obstacle to a Senate Banking Committee markup, potentially moving the broader legislation another step through the Senate. However, several other issues in the package remain under negotiation and have not been publicly resolved. Senators Alsobrooks and Tillis have spent months refining the text after a scheduled markup was postponed at the last minute in January. Since then, bank lobbyists and crypto insiders have continued to weigh in on the compromise effort, including in sessions hosted by the White House.

In March, the lawmakers indicated they had reached a conceptual agreement: crypto firms would be blocked from offering yield that looks like deposit interest, but could still design rewards programs that do not compete with banks’ core products. The newly published draft reflects that framework by barring passive, balance-derived returns while carving out space for incentives tethered to real activity.

The proposal also instructs the Treasury Department and the Commodity Futures Trading Commission to begin a rulemaking within a year of enactment to clarify how and when crypto firms may offer yield. Observers note that the rulemaking’s structure would allow regulators to consider how factors such as balance, duration, and tenure feed into rewards. That latitude could shape how companies align product mechanics with regulatory expectations, particularly in the many gray areas between participation incentives and deposit-like returns.

Industry Response

Coinbase—closely watched because of its potential exposure to restrictions on stablecoin rewards—signaled support for advancing the bill. “Mark it up,” Coinbase CEO Brian Armstrong wrote on X, urging the Senate Banking Committee to proceed. In a separate post, Coinbase chief legal officer Paul Grewal said the draft “preserves activity-based rewards tied to real participation on crypto platforms and networks,” adding that the company is focused on getting the bill done and is satisfied the language should not be grounds for objection.

Elsewhere, the Digital Chamber’s CEO, Cody Carbone, welcomed the public release of the stablecoin yield language, calling it an important step toward resolving one of the final issues before a markup. The group said it would continue advocating for the power of rewards to drive consumer utility, competition, and innovation within the digital asset ecosystem.

What Comes Next

With anti-evasion language included and the core prohibition on passive stablecoin yield now published, the immediate focal point is the Senate Banking Committee’s markup and the subsequent rulemaking path. For crypto platforms and stablecoin issuers, the practical question is how to operationalize “buy and use” models without drifting into prohibited interest-like territory. That will likely require more granular definitions and examples from regulators—and, in parallel, more sophisticated technical controls on the industry side to ensure that activity-based rewards are precisely that.

As the legislative process unfolds, the balance between encouraging real participation and preventing bank-like interest in the stablecoin market will hinge on how activity is defined and measured in practice. For firms that already employ algorithmic analytics to run rewards, manage risk, and monitor compliance, the draft points toward a future in which those systems—often enhanced by AI—are central to proving that incentives reflect genuine usage rather than passive holdings.