CLARITY Act Spurs Fight Over Onchain Dollar Yield, Coinbase Balks
The Digital Asset Market Clarity (CLARITY) Act, which missed its Jan. 15 markup and was moved to the end of the month, has become a dispute over who will control onchain U.S.-dollar yield — open decentralized finance (DeFi) protocols and payment networks or a limited set of large custodians and banks. The latest draft further tightens how rewards on stablecoins may be offered, prompting stablecoin issuers and institutional DeFi platforms to warn the measure could push onchain credit activity offshore rather than improve safety in the United States.
Coinbase withdrawal underscores industry concern
Coinbase withdrew its support for the bill this week, underscoring industry unease that the compromise favors incumbents and establishes a punitive framework for DeFi and rewards. CEO Brian Armstrong said it was better to have no bill than a bad one, while Jake Chervinsky, chief legal officer at Variant Fund, argued lawmakers should take the time needed to get it right.
How the bill could reallocate onchain dollar yield
Jakob Kronbichler, CEO and co‑founder of Clearpool, said the bill’s core risk is allowing regulators to decide where yield may exist rather than how risk is managed in onchain markets. “Demand for dollar yield won’t disappear because of legislation,” he said, adding that if compliant onchain liquidity structures are constrained, activity is likely to migrate offshore or consolidate among a small number of incumbent intermediaries.
Ron Tarter, CEO of stablecoin issuer MNEE and a former lawyer, voiced similar concerns, saying that if stablecoin rewards are pushed offshore instead of being made transparent and compliant onshore, the United States risks losing both innovation and visibility into these markets.
Kronbichler said that choice will shape where institutional onchain credit develops over the next decade.
Tarter interprets the bill as drawing a boundary between passive, deposit‑like interest and activity‑based incentives, with the phrase “solely in connection with holding” serving as a key pivot. He said the proposal attempts to balance concerns from banking groups about deposit flight with the view of platforms that regard rewards as a core revenue stream and incentive.
DeFi, developers and the question of control
Kronbichler pointed to one positive element: the current draft does not classify developers of non‑custodial software as financial intermediaries, which he said is essential for innovation and institutional participation. He emphasized keeping compliance obligations with entities that actually control access, custody, or risk parameters, rather than extending them to general software maintainers referred in some external sources.
If those boundaries blur, he said, institutional desks may find liability hard to evaluate and avoid U.S.‑facing onchain credit products. Tarter expects the developer control test to be a central issue at markup, including debates over what qualifies as truly decentralized software and cases where a small group can materially control outcomes.
Yield transparency and network activity
Jesse Shrader, CEO of Amboss, said rewards offered “simply for holding” can mask dilution or rehypothecation and present a consumer protection concern, citing failures such as Celsius and BlockFi. He contrasted opaque, platform‑defined yields with activity‑derived yields, which he argued are more transparent from a network‑design perspective.
For policymakers, Shrader’s first recommendation is to require regulated tokens to clearly disclose the sources of their yield so consumers can assess risk. He said a light regulatory touch is preferable, while Tarter said effective policy would protect users without prohibiting compliant innovation or entrenching a rewards framework that only the largest custodians can navigate.
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