CLARITY Act Fight Over Dollar Yield and DeFi Liquidity

Since missing its Jan. 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 to intermediate US dollar yield onchain — open decentralized finance (DeFi) protocols and payment rails, or a narrow club of large custodians and banks?

With the latest draft tightening how rewards on stablecoins can be offered, critics, including stablecoin issuers and institutional DeFi platforms, warn the bill risks exporting onchain credit offshore rather than making it safer in the United States.

Coinbase revolt highlights mounting industry unease

Coinbase’s decision to pull support for the bill this week laid bare industry fears that the compromise has tipped too far toward incumbents, the text locking in a punitive model for DeFi and rewards.

Coinbase CEO Brian Armstrong argued that it was better to have “no bill than a bad bill,” and chief legal officer at Variant Fund, Jake Chervinsky, said that CLARITY was the kind of law that would “live for 100 years,” and “We can take all the time we need to get it right.”

Related: Coinbase CEO expects market structure bill markup ‘in a few weeks’

How CLARITY reshapes onchain dollar yield

Clearpool onchain credit marketplace CEO and co-founder Jakob Kronbichler spoke to Cointelegraph about the CLARITY Act’s “core risk”: regulators deciding where yield is allowed to exist, instead of how risk is managed in onchain markets. 

“Demand for dollar yield won’t disappear because of legislation,” he said, arguing that if compliant onchain liquidity structures are constrained, activity is “likely to move offshore or concentrate in a small number of incumbent intermediaries.”

Ron Tarter, CEO of stablecoin issuer MNEE and a former lawyer, echoed Kronbichler’s concerns, telling Cointelegraph, “If stablecoin rewards are pushed offshore rather than made transparent and compliant onshore, the US risks losing both innovation and visibility into these markets.”

“That choice will shape where institutional onchain credit develops over the next decade,”  Kronbichler warned.

Tarter reads CLARITY as drawing a deliberate line between passive, deposit‑like interest and activity‑based incentives, adding that the key fulcrum is the phrase “solely in connection with holding.”

From his perspective, the bill is trying to mediate between banking groups worried that stablecoin yields could drain deposits and platforms viewing rewards as a core revenue stream and incentive.

Related: Crypto industry split over CLARITY Act after Coinbase breaks ranks

DeFi, developers and the “control” line

For now, Kronbichler sees one bright spot: CLARITY’s current approach “makes a sensible distinction by not treating developers of non‑custodial software as financial intermediaries,” something he calls critical for innovation and institutional comfort. 

The real challenge, he argues, is keeping compliance obligations tied to entities that actually control access, custody, or risk parameters, rather than drifting toward general software maintainers who do not. If those lines blur, institutional desks will struggle to assess liability and may simply avoid US‑facing onchain credit products.

Tarter agrees that the developer control test will likely be one of the most contested flashpoints at markup, expecting fierce debate over what qualifies as truly decentralized software and “situations where a small group can materially control outcomes.”

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Honest yield and network activity

Amboss — data analytics for the Bitcoin Lightning Network — CEO Jesse Shrader sees a genuine consumer protection problem in rewards “simply for holding” that mask dilution or rehypothecation, pointing to past failures like Celsius and BlockFi. 

He draws a sharp 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 preserve that distinction, Shrader’s first ask is simple: require regulated tokens to disclose clearly “the sources of their yield so consumers can adequately assess their risk.”

What kind of CLARITY outcome would genuinely protect users without choking compliant onchain dollar markets for everyone involved?

“A light touch from regulators is appreciated,” Shrader said, while Tarter believes the win comes from US policy protecting users “without banning compliant innovation” (and without locking in a rewards regime that only the largest custodians can afford to navigate).