The latest stablecoin legislation text circulating on Capitol Hill takes a hard line on yield. An internal stakeholder email obtained by journalist Eleanor Terrett on X details a draft that would prohibit platforms from offering yield “directly or indirectly” for holding a stablecoin or in any form that resembles a bank deposit.

The restriction applies broadly. Exchanges, brokers, and their affiliates are all covered, and the language bars anything “economically or functionally equivalent” to interest. No carve-outs for creative structuring.

Industry Divided After First Look at Draft

Not everyone is reading the same draft the same way. According to Eleanor Terrett on X, one industry leader who reviewed the text described it as a “departure” from prior discussions with the White House. That source flagged the “economic equivalence” standard as vague, warning future regulators could interpret it more restrictively than intended. Limits on tying rewards to balances or transaction amounts were also flagged as a structural problem for anyone trying to build incentive programs.

A second source landed in a different place entirely. That person told Terrett the draft is “largely in line with expectations,” reflecting what they called a balanced outcome. Transaction-based incentives stay intact. Stablecoins just cannot work like interest-bearing deposit accounts. That source called it “the best possible result,” adding the text is broader than the initial Tillis-Alsobrooks proposal, which had been more restrictive.

The Tillis-Alsobrooks agreement in principle, reached in late March, was already seen as a compromise between banking and crypto interests. This latest text moves that compromise further.

What the Draft Actually Permits

The proposal does not ban all rewards. Activity-based incentives tied to user behavior are permitted, covering loyalty programs, promotional offers, and subscription arrangements. The condition: they cannot be deemed economically or functionally equivalent to interest. That line is doing a lot of work in the text.

The CLARITY Act (H.R. 3633) also directs the SEC, CFTC, and Treasury to jointly define what permissible rewards actually look like, with anti-evasion rules due within one year of enactment.

Bank representatives were scheduled to review the text the following day, according to CoinDesk’s reporting on the latest legislative details. Their read could shift the conversation again.

The Vagueness Problem

One phrase is generating the most friction. “Economically or functionally equivalent” to interest appears multiple times across the draft, and its undefined boundaries are what the skeptical industry leader pointed to in their reaction shared with Terrett on X.

The concern is not just what regulators do with the text now. It is what a different administration, or a different SEC chair, does with the same language three years from now. That kind of regulatory flexibility cuts both ways.

The second source pushed back on that framing. Their view holds that the draft’s breadth is actually a feature, not a risk, preserving enough room for innovation while drawing a clear line at deposit-like products. Both reactions came from people who reviewed the same document on the same day.

What Comes Next

The joint rulemaking requirement gives the SEC, CFTC, and Treasury a defined timeline to build out the framework. One year is tight for three agencies to align on definitions. How those agencies land on “permissible rewards” will matter more than the statute’s current language for the day-to-day operation of crypto platforms.

The draft is still moving. Banking sector review follows crypto industry review, and any differences will feed back into negotiations.