Senate Bill Curbs Stablecoin Yield, Relaxes Rules for ETF-Linked Tokens

Key Facts at a Glance

• The Senate Banking Committee released an updated draft of the Digital Asset Market Clarity Act on Monday

• The proposal allows stablecoin rewards but bans yield earned solely from holding stablecoins

• Certain tokens linked to ETFs may receive disclosure exemptions
• The exemption cutoff date is January 1, 2026
• The Senate Agriculture Committee delayed its markup until late January

Stablecoin Yield Moves to the Forefront

At the heart of the revised draft is a sharper distinction between permissible rewards and prohibited yield. The legislation allows incentives based on active stablecoin usage rather than on how long the assets are held.

Importantly, the bill makes clear that these activity-based rewards do not alter a stablecoin’s legal status. Specifically, they do not convert stablecoins into securities or banking products.

However, the draft draws a firm boundary immediately afterward. Any interest or yield paid solely for holding a payment stablecoin is explicitly banned. Additionally, this restriction applies regardless of whether compensation is issued in cash, tokens, or other forms.

Separating Activity From Passive Returns

This distinction was designed to address long-standing concerns from traditional banking groups, which have argued that yield-bearing stablecoins closely resemble deposit accounts.

By contrast, crypto firms dispute that characterization, contending that most reward programs resemble incentives already common across fintech and payments platforms. Accordingly, the draft reflects this divide by permitting rewards tied to real economic activity while blocking passive returns.

To that end, the bill allows incentives connected to payments, transfers, remittances, and settlement activity. It also permits benefits tied to the use of wallets, accounts, platforms, and blockchain networks.

Broader Incentives Remain on the Table

Beyond core payment activity, the draft expands the scope of permissible incentives. Loyalty programs, promotional offers, subscriptions, and rebates involving stablecoins are explicitly allowed.

Additionally, the legislation accommodates crypto-native functions. Rewards tied to liquidity provision, collateral usage, governance participation, validation, staking, and broader ecosystem engagement remain permissible.

Across all of these categories, the underlying principle is consistent: the bill favors participation and usage over passive holding.

ETF Status Redefines Token Disclosure Rules

Alongside stablecoin yield, the draft introduces a significant shift in how certain tokens are treated for disclosure purposes. As highlighted by Crypto In America journalist Eleanor Terrett, the bill includes language affecting tokens tied to exchange-traded products.

Under the proposal, a token may be exempt from certain disclosure requirements if it serves as the ETF’s primary asset. To qualify, the product must be listed on a national securities exchange and registered under the Securities Exchange Act.

Crucially, the exemption applies to ETFs in existence as of January 1, 2026. Tokens meeting these criteria would no longer be subject to the same disclosure filing requirements as other digital assets.

As written, the provision places several well-known tokens on equal regulatory footing with Bitcoin and Ethereum from the start. Assets such as XRP, LTC, SOL, DOGE,  LINK, and HBAR could qualify if they meet the ETF criteria.

In effect, ETF inclusion functions as a proxy for regulatory maturity, reducing compliance obligations for qualifying tokens.

Legislative Progress Remains Uneven

Despite progress at the Banking Committee, movement elsewhere has slowed. The Senate Agriculture Committee postponed its markup of the crypto market structure bill until the final week of January.

Chairman John Boozman said the delay is intended to allow more time to secure bipartisan support. The pause underscores the complexity of aligning multiple committees on crypto legislation.

Industry Pushback Continues Outside Congress

Meanwhile, debate over stablecoin yield is intensifying beyond Capitol Hill. Last week, a group of US community banks urged lawmakers to revise the GENIUS Act, warning that stablecoin issuers are indirectly routing yield through exchanges and partners.

The banks argue that these practices could divert deposits away from community lenders, reducing credit availability.

On the other hand, crypto advocacy groups have rejected that argument. In a letter sent last month, the Crypto Council for Innovation and the Blockchain Association said payment stablecoins do not fund loans. Instead, they cautioned that tighter rules could restrict innovation and consumer choice.

As negotiations continue, the updated draft makes one thing clear: lawmakers are attempting to balance innovation with financial risk by drawing precise lines around stablecoin yield and token classification, even as consensus on broader crypto regulation remains a work in progress.