The CLARITY Act Prohibits Passive Yield Systems for Stablecoin Holders

Cryptocurrency regulations are undergoing a profound transformation with the enactment of Section 404 of the CLARITY Act, which prohibits rewards solely based on holding stablecoins on a platform. This policy is designed to prevent stablecoins from being used like traditional bank deposit products with fixed interest. These changes mark a significant shift in how the crypto ecosystem manages incentives for users.

Differentiating Active Rewards from Passive Rewards

The law does not prohibit all forms of yields, but rather bans reward models that depend solely on holding or storing stablecoins without further activity. Conversely, platforms are allowed to provide rewards for specific activities: active traders who execute transactions will receive incentives, liquidity providers in trading pools are entitled to compensation, and participants in governance or voting processes can also earn benefits. This distinction creates a more dynamic ecosystem, encouraging active participation rather than merely holding assets.

Transparency Requirements and Compliance Barriers

The implementation of the CLARITY Act also requires full disclosure of reward mechanisms to users, ensuring everyone understands how and why they receive rewards. The regulation restricts direct involvement of stablecoin issuers in designing or managing reward programs, promoting the independence of incentive systems. According to NS3.AI analysis, these changes pose complex compliance challenges for platforms, especially in adjusting existing technical infrastructure and business models. These restrictions may also alter strategic partnerships between platforms and stablecoin issuers, creating a more segmented and regulated industry dynamic.