Stablecoin Rewards in the Market Structure Bill: What the Markup Text Allows—and What It Prohibits
As the Senate Banking Committee prepares to mark up the Digital Asset Market Clarity Act, one of the most closely scrutinized sections is Title IV, Section 404, which addresses rewards, yield, and compensation associated with payment stablecoins.
Although public debate has framed this issue as a renewed fight over stablecoin “interest,” the bill text itself reflects a narrower and more structured approach. Rather than reopening the GENIUS Act’s core prohibitions, the market structure bill largely codifies and operationalizes the existing distinction between prohibited interest and permitted activity-based incentives, while adding disclosure and marketing constraints. Baseline Rule: Yield for Passive Holding Is Prohibited
The bill adopts a clear baseline rule: no interest or yield may be paid solely for holding a payment stablecoin.
Section 404(b)(1) provides that a digital asset service provider may not pay “any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding of a payment stablecoin.” This provision appears in Title IV, page 190, lines 5–9.
This language mirrors the GENIUS Act’s treatment of payment stablecoins and confirms that:
Payment stablecoins are not savings products.
Passive, balance-based yield programs are not permitted.
The bill does not authorize stablecoins to function as deposit substitutes paying interest.
The markup text therefore maintains continuity with existing stablecoin legislation rather than expanding yield-bearing functionality.
Explicit Carve-Out: Activity-Based Rewards Are Permitted
Immediately following the interest prohibition, the bill creates a structured exception for activity-based rewards and incentives.
Under Section 404(b)(2) (pages 190–191), the prohibition on interest does not apply to compensation tied to specific activities, including:
Transactions, payments, transfers, remittances, or settlement activity
(§404(b)(2)(A), p.190 lines 39–41)Use of wallets, accounts, platforms, applications, protocols, or networks
(§404(b)(2)(B), p.190 lines 41–42)Loyalty, promotional, subscription, or incentive programs
(§404(b)(2)(C), p.190 lines 43–44)Merchant acceptance, settlement, or acquiring activity, including rebates
(§404(b)(2)(D), p.190 lines 44–47)Providing liquidity or collateral
(§404(b)(2)(E), p.191 line 49)Governance, validation, staking, or other ecosystem participation
(§404(b)(2)(F), p.191 lines 49–51)
As drafted, the bill recognizes that not all compensation associated with stablecoins constitutes interest. Rewards tied to usage, participation, or infrastructure support are treated as permissible, provided they are not framed as yield on held balances.
Marketing and Representation Constraints
The bill pairs permissive treatment of activity-based rewards with explicit marketing restrictions.
Section 404(c) (pages 191–192) prohibits any person from marketing or describing stablecoin-related compensation in a manner that represents that:
The payment stablecoin is a deposit or is FDIC-insured
The compensation is paid by the stablecoin itself or its issuer
The compensation is risk-free or comparable to bank interest
The identity of the party paying the compensation is obscured
Material information necessary to prevent misleading impressions is omitted
These provisions are designed to prevent consumer confusion between:
bank deposits and payment stablecoins, and
interest-bearing accounts and activity-based incentive programs.
Disclosure Requirements for Permitted Rewards
Even where rewards are allowed, they are subject to a mandatory disclosure regime.
Under Section 404(d) (pages 192–193), the SEC and CFTC are directed to jointly promulgate rules requiring clear, plain-English disclosure of any compensation paid in connection with payment stablecoins. Required disclosures must identify:
The activity that earns the compensation
The party responsible for paying it
All material terms
That the payment stablecoin is not an investment product
That it is not a deposit and not FDIC-insured
Absent these disclosures, marketing of compensation tied to stablecoins is prohibited.
Treatment of Third-Party Reward Programs
The bill also addresses the allocation of responsibility between stablecoin issuers and downstream platforms.
Section 404(f)(2) (page 195, lines 25–30) provides that a permitted payment stablecoin issuer is not deemed to be paying interest or yield solely because a third party independently offers rewards or incentives related to the stablecoin, unless the issuer directs the program.
This provision separates issuer conduct from platform-level incentive design and clarifies that issuer compliance is not automatically affected by third-party reward programs.
Summary of Accepted vs. Prohibited Stablecoin Yield
Prohibited under the markup text
Interest or yield paid solely for holding a payment stablecoin
Marketing that frames rewards as deposit-like, risk-free, or issuer-paid interest
Compensation programs lacking required disclosures
Permitted under the markup text
Rewards tied to transactions, usage, or participation
Loyalty, rebate, and promotional programs
Incentives related to liquidity provision or ecosystem activity
Third-party reward programs not directed by issuers, subject to disclosure rules
Conclusion
As presented for markup, the Digital Asset Market Clarity Act does not expand stablecoin yield rights, nor does it eliminate stablecoin rewards. Instead, it formalizes a distinction already embedded in prior legislation: passive yield on stablecoin balances is prohibited, while activity-based incentives are permitted within a regulated framework.
The bill’s approach reflects a regulatory choice to constrain stablecoins as interest-bearing instruments while allowing them to function as competitive payment infrastructure, subject to disclosure and marketing controls. The markup debate, accordingly, centers less on whether rewards exist, and more on how narrowly or broadly the line between “interest” and “activity-based compensation” should be enforced going forward.