The U.S. is eyeing April to finalize its much anticipated CLARITY Act which now leaves regulators with just over a month to resolve issues with the draft bill. On Thursday, members of the crypto and banking industries assembled in the White House for another session of discussions on this crypto market structure bill only to leave with a March 1 deadline to resolve the stablecoin rewards dispute.
Understanding CLARITY’s stablecoin dispute
The Senate committees of banking and agriculture — that respectively oversee the SEC and the CFTC in the U.S. — have collectively been working on drafting the CLARITY Act. In January, they had proposed a draft bill, that was strongly pushed back by Coinbase CEO Brian Armstrong.
Armstrong, at the time, had raised multiple concerns with the proposed legislation, one of them being the killing of rewards on stablecoin holdings. The Coinbase chief had said that through this the banks wan’t to ban their competition.
As pointed by Armstrong, the language of the draft guidelines suggested that fintechs could be prohibited from offering rewards (yields) to their users for holding stablecoins on their platforms.
Stablecoins are digital assets that derive their value from the reserved assets that they are pegged to like gold or a fiat currency. This keeps them shielded against market volatility. The stablecoin maintains a 1:1 price ratio with the underlaying asset making them equivalent to the underlaying asset. Tether (USDT) is the largest stablecoin by market cap with each token equivalent to $1.
Crypto advocates are hopeful that regulators will separate stablecoin yields from usage rewards. They bat for stablecoin yields bring treated like traditional credit card cash-back programs.
Status of discussions
Policymakers have been meeting with members of the crypto and banking industries on a regular basis in Washington D.C. to have dialogues on amendments on the proposed bill.
During the Thursday session of these ongoing meetings, the White House said this stablecoin dispute must be resolved in the next ten days leading to March 1. This move has heightened the urgency around finalizing the crypto market structure bill.
Ohio state Senator Bernie Moreno disclosed this week that the CLARITY Act is likely to be finalized by April this year. Ripple CEO Brad Garlinghouse also said there is a 90 percent chance that April could be a milestone month with the CLARITY Act being passed.
As per White House crypto czar David Sacks once this legislation goes live, banks will fully get into crypto.
The CLARITY Act is intended to focus on investor protection, outline legal mandates for crypto firms, and align the U.S. crypto market with global standards. The bill further proposes to grant crypto oversight to the SEC and the CFTC in the U.S.