Crypto: Who Gets The Yield? Clarity Act Becomes Fight Over Onchain Dollars

The CLARITY Act is becoming a fight over who controls yield as rules split DeFi companies and incumbents and risk pushing onchain US dollar yield offshore.

Since missing its Jan. 15 markup date and being pushed to the end of the month, the Digital Asset Market Clarity (CLARITY) Act is becoming a proxy fight over who gets to intermediate US dollar yield onchain — open decentralized finance (DeFi) protocols and payment rails, or a narrow club of large custodians and banks?

With the latest draft tightening how rewards on stablecoins can be offered, critics, including stablecoin issuers and institutional DeFi platforms, warn the bill risks exporting onchain credit offshore rather than making it safer in the United States.

Coinbase’s decision to pull support for the bill this week laid bare industry fears that the compromise has tipped too far toward incumbents, the text locking in a punitive model for DeFi and rewards.

Coinbase CEO Brian Armstrong argued that it was better to have “no bill than a bad bill,” and chief legal officer at Variant Fund, Jake Chervinsky, said that CLARITY was the kind of law that would “live for 100 years,” and “We can take all the time we need to get it right.”

Related: Coinbase CEO expects market structure bill markup ‘in a few weeks’

Clearpool onchain credit marketplace CEO and co-founder Jakob Kronbichler spoke to Cointelegraph about the CLARITY Act’s “core risk”: regulators deciding where yield is allowed to exist, instead of how risk is managed in onchain markets.

“Demand for dollar yield won’t disappear because of legislation,” he said, arguing that if compliant onchain liquidity structures are constrained, activity is “likely to move offshore or concentrate in a small number of incumbent intermediaries.”

Ron Tarter, CEO of stablecoin issuer MNEE and a former lawyer, echoed Kronbichler’s concerns, telling Cointelegraph, “If stablecoin rewards are pushed offshore rather than made transparent and compliant onshore, the US risks losing both innovation and visibility into these markets.”

“That choice will shape where institutional onchain credit develops over the next decade,”  Kronbichler warned.

Source: CoinTelegraph