Will your crypto rewards survive upcoming CLARITY law? A plain-English guide to Section 404
Section 404 of the CLARITY Act targets passive stablecoin yield, shifting rewards toward activity-based incentives and participation.Summary
The Digital Asset Market Clarity (CLARITY) Act, specifically Section 404, aims to regulate crypto rewards by prohibiting interest or yield offered "solely in connection with the holding of a payment stablecoin," viewing this as a direct competitor to bank deposits. The law carves out an exception for "activity-based rewards," such as those tied to transactions, loyalty programs, or providing liquidity/collateral, effectively separating payment for parking from payment for participation. Furthermore, Section 404 imposes strict marketing and disclosure requirements, banning suggestions that stablecoins are FDIC-insured deposits and demanding clear attribution for who funds rewards. A critical element is the clause concerning whether an issuer "directs the program" when a third party offers rewards; this ambiguity around influence versus formal control is a major battleground for future partnerships. The likely outcome is a shift where platforms offer engagement-based rewards, and issuers maintain distance from platform compensation structures to avoid regulatory scrutiny.
(Source：CryptoSlate)