The CLARITY Act now bans yield generation from stablecoins for every intermediary holding them, including exchanges and custodians. This broadens the existing prohibition on stablecoin issuers to cover all platforms handling these assets under a Tillis-Brooks legislative compromise. The White House estimates this shift will boost bank lending by $2.1 billion but cost $800 million in net welfare losses.
Universal Ban on Platform Rewards
The law uses a 'functional or economic equivalent' test that treats any yield product like bank interest regardless of its label. The Tillis-Brooks compromise explicitly closes loopholes for transactional activity by applying the ban to 'all intermediaries, any exchange, any platform holding stablecoins.' No custodial service can now offer returns on stablecoin balances.
Banking Industry's Core Argument
Banking and credit-union groups pushed for this change to eliminate what they call unregulated shadow banking. They argue stablecoin rewards unfairly compete with insured deposits by promising returns without oversight. The industry sees the CLARITY Act as essential for protecting traditional banking from unregulated competitors.
Yield-as-a-Service Workarounds
STBL's Chief Compliance Officer Joe Vollono identifies a new market structure where AI agents handle yield generation without holding assets. These agents monitor chain liquidity, assess protocol risk, and execute DeFi transactions to produce compliant returns. The system is designed to operate outside the CLARITY Act's scope by avoiding direct custody of stablecoins.
Measured Economic Impact
The White House Council of Economic Advisers projects the yield ban will increase U.S. bank lending by $2.1 billion as funds shift toward traditional accounts. However, the same analysis shows a net welfare cost of $800 million from restricted consumer options. Both figures represent the only quantified economic outcomes in the legislation's impact assessment.
How the CLARITY Act's 'functional equivalent' test applies to AI-mediated yield services remains unclear. Regulators must now determine whether transactional DeFi activities cross the line into regulated interest.
