- French Hill says the CLARITY Act aims to bring clear rules for crypto markets.
- Lawmakers say stablecoins should work as payment tokens, not yield products.
- Crypto firms want stablecoin rewards while banks warn about regulatory loopholes.
U.S. lawmaker French Hill said the proposed CLARITY Act is designed to bring clear rules to the crypto industry, as policymakers debate whether stablecoins should be allowed to offer rewards to users.
Speaking in a recent interview, Hill said Congress had already shown bipartisan support for crypto legislation last year when lawmakers passed both the CLARITY Act and the GENIUS Act in the House with support from dozens of Democrats.
“I want to thank Donald Trump and his top AI and crypto advisers, David Sacks and Patrick Witt, for engaging in the Senate and trying to find a legislative solution,” Hill said.
Stablecoins Meant for Payments, Not Yield
Hill said lawmakers designed the legislation around a core principle that dollar-backed stablecoins should function primarily as payment tokens on blockchain networks.
Under that approach, stablecoins would not be treated like interest-bearing financial products.
“We view stablecoins as a new payment token used on blockchain,” Hill said, adding that they are not intended to operate like banks or savings accounts.
The GENIUS Act framework reflects that view by preventing both banks and non-bank issuers from offering yield directly on dollar-backed stablecoins.
Crypto Firms Push For Rewards
Some crypto companies argue that limiting rewards could make it harder for digital asset platforms to compete with traditional financial institutions. Brian Armstrong, chief executive of Coinbase, has said stablecoin rewards could help create a more competitive financial system where users earn returns on their holdings.
Banks Raise Concerns Over Loopholes
The debate has intensified as lawmakers consider whether crypto platforms could bypass restrictions through alternative reward programs.
Some policymakers worry exchanges could offer incentives through membership programs or third-party partnerships, effectively recreating yield products without formally labeling them as interest. Hill said regulators may ultimately address those issues through rulemaking.
He added that the U.S. Treasury Department could set guidelines to ensure both banks and non-bank stablecoin issuers follow similar rules when it comes to marketing, incentives, and product design.
Banking Protections Remain a Dividing Line
Another difference between banks and crypto platforms is consumer protection. Deposits at banks are insured by the Federal Deposit Insurance Corporation, while crypto exchanges generally do not offer the same guarantee.
Hill said that most dollar-backed stablecoins are supported by reserves such as bank deposits or U.S. Treasury securities, but they still operate differently from traditional bank accounts.
Crypto Regulation Gains Momentum
The push for clearer crypto regulation has gained support from several policymakers.
Paul Atkins said the CLARITY Act could help provide the regulatory certainty needed for companies to build digital financial products in the United States.
For lawmakers, the challenge now is balancing innovation with financial safeguards as the digital asset industry continues to expand.
Related: US Regulators Advance Plans to Regulate Crypto Tokens and Prediction Markets
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