This is why banks oppose stablecoin yield.
If stablecoins pay interest, deposits leave banks. That means less leverage, less lending, and less profit.
Blocking yield is solely about protecting the banking model.
Stablecoins are better than banks.
But this part of CLARITY ACT sets rules around when stablecoin yield is allowed.
It prohibits digital asset service providers from paying interest/yield when the only condition is holding a stablecoin. But it does not apply to rewards that are tied to specific actions.
Incentives connected to actions like transactions, transfers or settlements, wallet or application use, and participation in loyalty programs.
The effect is to separate passive balance based yield from activity based rewards.
Stablecoins can still generate returns when they are used within a network or application, but not when they are held idle.
If this sticks, they would not be permitted to function as interest bearing instruments in the same way as deposit accounts.
Banks see what’s coming and this blocks competition.