Digital Chamber: CLARITY Act limits on stablecoin yields could aid foreign currencies

The Digital Chamber urged Congress to preserve the ability of payment stablecoins to generate rewards through decentralized finance, asking lawmakers to retain the exemptions in Section 404. Those provisions distinguish traditional bank "interest" on insured deposits from "rewards" earned by providing liquidity on decentralized exchanges.

The group warned that removing those exemptions would stifle US innovation and could weaken the dollar’s role in the digital economy. If US-regulated stablecoins are legally barred from DeFi markets, it said, capital could flow to foreign-issued digital assets or unregulated offshore entities, reducing demand for the US dollar.

A blanket ban would also push users into passive holding strategies and could increase exposure to impermanent loss in liquidity pools. Banking groups counter that yield-bearing stablecoins create regulatory arbitrage and could siphon deposits from community banks, a stance that has hardened opposition from Wall Street lobbyists.

United States

clarity act, stablecoins, section 404, defi, rewards, us dollar, foreign assets, liquidity pools, impermanent loss, regulatory arbitrage