Proposed limits on stablecoin yields under the U.S. CLARITY Act are raising concerns that capital could move away from regulated markets into offshore and unregulated financial instruments. Industry experts warn that restricting yield on compliant dollar stablecoins may unintentionally weaken regulatory oversight rather than strengthen it.
The current U.S. framework treats payment stablecoins as digital cash equivalents, requiring full backing by cash or short-term Treasuries and prohibiting direct interest payments to holders. While designed to reduce systemic risk, critics argue this ignores a basic market reality: investors consistently seek yield. With short-term U.S. Treasuries yielding around 3.6% and many bank deposits paying far less, limiting stablecoin yields could simply redirect funds elsewhere.
Restrictions could fuel growth in synthetic dollar instruments assets that track the dollar through trading strategies rather than one-to-one fiat reserves. These products often operate in regulatory gray areas, offering higher returns but less transparency and weaker consumer protections. As onshore options become less competitive, capital may migrate toward these alternatives beyond U.S. jurisdiction.
Banks argue that yield-bearing stablecoins threaten deposit stability. However, critics counter that consumers already access yield through money market funds, T-bills, and high-yield accounts, and that stablecoins merely extend these options into digital markets.
Other regions are moving ahead with interest bearing digital currencies. Experts warn that banning yield on compliant U.S. stablecoins could reduce America’s influence in digital finance, pushing global capital toward jurisdictions with more flexible, transparent frameworks.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.