Since missing the January 15 markup date and being pushed to the end of the month, the Digital Asset Market Clarity (Clarity) Act is becoming a proxy fight over who gets intermediate US dollar yields on chain – open decentralized finance (DeFi) protocols and payment rails, or a narrow club of big custodians and banks?
With the latest draft tightening how rewards can be offered on stablecoins, critics, including stablecoin issuers and institutional DeFi platforms, have warned that the bill reflects the risks of exporting onchain credit offshore rather than making it safer in the United States.
Coinbase revolt highlights industry’s growing unease
Coinbase’s decision to withdraw support for the bill this week has highlighted industry fears that the agreement went too far toward incumbents, locking in a punitive model for text DeFi and rewards.
Coinbase CEO Brian Armstrong argued that it is better to have “no bill at all than a bad bill,” and Jake Chervinsky, chief legal officer of the Variant Fund, said that Clarity was the kind of law that “will live for 100 years” and “we’re going to take all the time we can to get it right.”
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How CLARITY onchain is reshaping dollar yields
Jacob Kronbichler, CEO and co-founder of Clearpool onchain credit marketplace, spoke to Cointelegraph about the “key risk” of the Clarity Act: Regulators dictating where yield is allowed to exist, rather than how risk is managed in onchain markets.
“Demand for dollar yield will not disappear because of the law,” he said, arguing that if compliant onchain liquidity structures are disrupted, activity “is likely to shift offshore or concentrate in a small number of existing intermediaries.”
Ron Tarter, CEO of stablecoin issuer MNEE and a former lawyer, echoed Kronbichler’s concerns, telling Cointelegraph, “If stablecoin rewards are pushed offshore instead of being made transparent and compliant onshore, the US risks losing both innovation and visibility in these markets.”
“This choice will shape how institutional onchain credit evolves over the next decade,” warned Kronbichler.
Tarter reads the clarity as a deliberate drawing of a line between passive, deposit-like interest and activity-based incentives, and says the key premise is the phrase “in respect of holdings only”.
From their perspective, the bill is trying to mediate between banking groups that are worried that stablecoin yields could crowd out deposits and platforms that are looking at rewards as the main revenue stream and incentive.
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DeFi, developers and the “control” line
For now, Kronbichler sees a bright spot: Clarity’s current approach “makes a sensible difference by not treating developers of non-custodial software as financial intermediaries,” which he calls important for innovation and institutional comfort.
He argues that the real challenge is to tie compliance obligations to the entities that actually control access, custody or risk parameters, rather than moving to generic software maintainers that do not. If those lines become blurred, institutional desks will struggle to assess liability and could easily avoid the consequences the US faces with on-chain credit products.
Tarter agrees that developer control testing will likely be one of the most contested flashpoints over the markup, expecting a heated debate over what qualifies as truly decentralized software and “situations where a small group can physically control the outcomes.”
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Honest Yield and Network Activity
Emboss – Data Analytics for the Bitcoin Lightning Network – CEO Jesse Schrader sees a real consumer protection problem in “just holding” rewards that hide dilution or rehypothecation, pointing to past failures like Celsius and BlockFi.
He draws a clear line between opaque, platform-defined yields and activity-derived yields, which, he argues, are more transparent from a network design perspective.
For lawmakers looking to maintain that distinction, Schrader’s first question is simple: “Require regulated tokens to clearly disclose the sources of their yield so consumers can adequately assess their risk.”
What kind of clarity will result in actually protecting users without disrupting compliant onchain dollar markets for everyone involved?
Schrader said, “The light touch of regulators is appreciated,” while Tarter believes the win comes from U.S. policy protecting users “without imposing restrictions on compliant innovation” (and without locking them into a rewards system that only the biggest patrons can navigate).
