The Digital Asset Market Clarity (CLARITY) Act, originally set for Jan. 15 markup, faces controversy over who gets to control US dollar yield onchain, either DeFi protocols or banks and large custodians. The latest draft tightens stablecoin rewards, risking offshore credit rather than US safety.

Coinbase’s withdrawal of support for the bill ignites industry unease, with concerns that the compromise favors incumbents. CEO Brian Armstrong prefers “no bill than a bad bill.” CLARITY could shape institutional onchain credit for the next decade, impacting where activity concentrates.

CLARITY’s impact on onchain dollar yield raises concerns about compliance constraints and offshore activity. Stablecoin issuers worry rewards may move offshore, risking innovation loss for the US. The bill distinguishes between interest and incentives, mediating between banking groups and platforms.

The CLARITY Act’s approach is seen positively due to its distinction between developers of non-custodial software and financial intermediaries. Compliance obligations need to be tied to entities controlling access, custody, or risk parameters to avoid confusion for institutional desks.

Amboss CEO sees a consumer protection issue in rewards for holding, masking dilution or rehypothecation. Transparency in yield sources is crucial for assessing risk. Lawmakers need to preserve the distinction between opaque and activity-derived yields to protect users without stifling onchain markets.

Read more at Cointelegraph: CLARITY Act Fight Over Dollar Yield and DeFi Liquidity