CLARITY Act: US Senators Finalize Stablecoin Yield Rules

US Senators Thom Tillis and Angela Alsobrooks published the final text of Section 404 of the CLARITY Act, setting rules for payments on payment stablecoins. The release clears one of the central disputes between the banking industry and crypto that had stalled the bill in Congress. Coinbase CLO Faryar Shirzad wrote that it is time to get CLARITY done.

What is the CLARITY Act and why does it matter?

The CLARITY Act is a bill US lawmakers have been drafting for years. The document is meant to set clear rules for payment stablecoin issuers in the US and divide oversight responsibilities among market regulators.

The bill repeatedly stalled over the yield dispute. The banking sector firmly opposed any interest payments on stablecoins, fearing deposit outflows. The crypto industry defended the right of platforms to run reward programs for users. The compromise text published on May 2, 2026 attempts to address both sides.

What exactly does Section 404 prohibit?

Under the new text, no company can pay "any form of interest or yield" to a payment stablecoin holder simply for holding the asset. The model "deposit USDT and earn interest" becomes illegal in the US market. The law makes no exceptions for foreign companies serving US customers.

The restriction covers several specific scenarios:

• Banned: interest payments for holding, equivalent to a bank deposit
• "Yield on holding" products where returns accrue automatically without any action from the owner
• The prohibition applies to all issuers and platforms distributing payment stablecoins in the US
• The company's country of registration does not matter

Where is the line between banned and allowed?

The compromise centers on "bona fide activities" (rewards for genuine platform use). If a stablecoin holder uses it to pay for goods or services, trades on a platform, or supplies liquidity to a protocol, they can earn a reward. That is not "interest for holding" but payment for a specific action.

Shirzad summarized the outcome: banks got more restrictions on reward programs, but the right of Americans to earn rewards through real use of crypto platforms was preserved. Helius Labs CEO Mert Mumtaz was less enthusiastic. In his view, the text clarified just one thing. Risk-free yield on dollars outside the banking system is no longer available to Americans.

Why are banks opposed and how is the market reacting?

The banking opposition is straightforward. If USDC or a competing stablecoin starts paying interest for holding, customers will move money from bank accounts into crypto. That shrinks the deposit base and banks' ability to lend. Galaxy Digital researcher Alex Thorn said the text release will push banks to increase their opposition during markup.

The crypto industry reacted more positively. Coinbase CEO Brian Armstrong wrote two words. "Mark it up". On prediction market Polymarket, the probability of the CLARITY Act being signed in 2026 rose to 55%, up 9 percentage points from the day before the compromise was published.

When should we expect a Congressional vote?

Thorn expects the Senate Banking Committee to schedule markup for the week of May 11. At markup, committee members propose amendments and vote to send the bill to the full Senate. After that it passes a Senate floor vote, then the House, and only then goes to the president for signature.

Senator Bernie Moreno expects the law passed by the end of May. Senator Cynthia Lummis said in April 2026 that it is now or never. Even if markup proceeds on schedule, reconciling differences between the two chambers will take time. Polymarket already reflects the progress in its odds, but the final text of the bill can still change.