Written by: Blockhead

Translated by: Baihua Blockchain

For two months, the most comprehensive cryptocurrency bill in the U.S. Congress, the CLARITY Act, has been at a standstill. It has made no progress whatsoever. The culprit is a dispute over stablecoin yields, which has pitted cryptocurrency companies against traditional banks, with neither side willing to compromise.

Then, on March 20, Senator Thom Tillis (Republican - North Carolina) and Angela Alsobrooks (Democrat - Maryland) reached a preliminary agreement on stablecoin yields, breaking the deadlock that had persisted since January.

Three days later, a new compromise text was released: Stablecoins can provide rewards based on user activities (transactions, lending, transfers), but cannot offer yields on idle balances. This is a subtle distinction but has significant implications for the function of stablecoins in large-scale operations.

Today, as this agreement is still under review by representatives of the cryptocurrency industry and banks on Capitol Hill, the House Financial Services Committee is holding a dedicated tokenization hearing — indicating that a Senate vote may take place this week (Markup).

Why the Deadlock is Important

The CLARITY Act essentially does three things: (1) establishes a clear classification of securities and commodities; (2) creates a safe harbor principle for developers; (3) formulates rules for stablecoins. The House version has passed; the Senate version has stalled due to a provision — whether stablecoins can generate yields — evolving into a proxy war between the two industries.

From the banking side, interest-bearing stablecoins are essentially deposits and should be regulated as such. They are concerned about the outflow of customer cash. Cryptocurrency companies counter that yields are a necessary infrastructure. Without yields, stablecoins are merely payment tools rather than capital tools. Institutional adoption heavily relies on the ability to earn returns.

This dispute is real but has also led to paralysis. For two months, votes in the Senate Banking Committee have been canceled, and the bill has made no progress. Polymarket's predictions have fluctuated, losing momentum at times.

Analysis of the Compromise

The Tillis-Alsobrooks agreement adopts a compromise. Here is what it allows:

• Permitted: Stablecoins can provide rewards for user engagement in protocol activities — such as trading, providing liquidity, lending, and using the stablecoin in DeFi applications. Yields are tied to activities rather than balances.
• Prohibited: Stablecoins cannot pay interest on dormant balances. You cannot earn a 4% yield merely by holding USDC. This crosses regulatory lines and turns into a "deposit product."

The latest text explicitly states: "Stablecoin reward programs must be tied to user activities, not passive holdings."

This has important operational distinctions. Passive yield programs require heavy compliance infrastructure since they function similarly to interest-bearing accounts. In contrast, activity-based rewards are algorithmic — triggered by transactions rather than the duration of custody. However, industry insiders have already deemed the new language "too narrow and vague," and the details of the mechanism remain undefined. This gap needs further clarification before issuers can operationalize the reward programs.

Who Benefits the Most: Institutional Scenarios

The real winners here are specific types of institutions:

Trading platforms and exchanges. They benefit immediately. Stablecoins can now incentivize trading volume through transaction rebates — exactly what cryptocurrency trading platforms need to compete for institutional order flow. Platforms like Coinbase and Kraken are expected to launch trading incentives for USDC or USDT within weeks after the passage of the CLARITY Act.

Custody and treasury platforms. Institutions holding digital assets for three years need stablecoins to work "harder" than cash. Activity-based rewards mean treasury managers can keep USDC in compliant custodians (like Fidelity or Coinbase Custody) and earn yields through treasury operations (funding projects, cross-border payments to suppliers, managing collateral). Stablecoins become productive assets rather than idle cash.

RWA platforms and tokenization. Real World Assets (RWA) — tokenized bonds, stocks, commercial paper — require stablecoin infrastructure for settlement and collateralization. Activity-based rewards mean stablecoins used for settling RWA transactions can automatically earn yields. This opens the door for institutional adoption for tokenized products previously hindered by settlement friction.

Asset management firms launching digital strategies. Institutions needing to deploy capital for lending in DeFi or on-chain now have stablecoins that comply with the CLARITY Act and earn yields by participating in protocols. This provides legitimacy for conservative institutional allocators in on-chain strategies.

Timelines Accelerate Everything

The Tillis-Alsobrooks agreement breaks the deadlock as it receives support from the White House. This signals that the current administration is pushing for cryptocurrency legislation. A Senate vote is imminent — very likely this month.

Meanwhile, the House will hold a tokenization hearing tomorrow, with the current RWA market size exceeding $12 billion. The hearing has two purposes: (1) to build momentum for the Senate to pass the bill; (2) to prepare for the House to pass its own companion bill if necessary.

The CLARITY Act has not yet officially become law. There are still four substantive steps remaining before it reaches the President's desk. However, the yield dispute — the real issue that caused the progress to derail — has been resolved.

For those institutions waiting to deploy tokenization infrastructure until regulatory clarity is achieved, the signal is clear: the technical and policy frameworks are coming into alignment. The bill clearing the path is finally no longer obstructed.