Lawmaker French Hill pushes stablecoins as payments, not yields in CLARITY Act debate

The debate around the CLARITY Act intensified this week after U.S. lawmaker French Hill reiterated that the legislation is designed to provide clear regulatory rules for the cryptocurrency industry while ensuring that stablecoins function primarily as payment tools rather than yield-generating financial products.

Speaking in a recent interview, Hill said the CLARITY Act reflects a broader effort in Congress to establish regulatory certainty for digital assets. The lawmaker noted that lawmakers had already demonstrated bipartisan support for crypto regulation in the House of Representatives last year, when both the CLARITY Act and the GENIUS Act passed with backing from dozens of Democrats.

Hill also credited political and policy figures involved in the broader digital asset policy discussion.

“I want to thank Donald Trump and his top AI and crypto advisers, David Sacks and Patrick Witt, for engaging in the Senate and trying to find a legislative solution,” Hill said.

The ongoing discussion surrounding the CLARITY Act highlights a central question in U.S. crypto policy: whether stablecoins should operate strictly as digital payment instruments or evolve into yield-bearing financial assets.

CLARITY Act defines stablecoins as payment tokens

At the core of the CLARITY Act debate is the intended function of stablecoins in the financial system. According to Hill, lawmakers structured the CLARITY Act around the principle that dollar-backed stablecoins should operate primarily as payment tokens on blockchain networks.

Under this approach, stablecoins would facilitate transactions and settlements but would not be classified as interest-bearing financial products.

“We view stablecoins as a new payment token used on blockchain,” Hill said, emphasizing that they are not meant to operate like traditional banking products such as savings accounts.

This principle is reflected in the regulatory structure proposed alongside the CLARITY Act, particularly within the framework of the GENIUS Act. That framework seeks to prevent both banks and non-bank issuers from directly offering yield on dollar-backed stablecoins.

Supporters of the CLARITY Act argue that maintaining this distinction could reduce financial risks and prevent stablecoins from functioning as shadow banking instruments.

Crypto companies push for stablecoin rewards

While policymakers emphasize payment functionality, some crypto companies argue that the restrictions proposed under the CLARITY Act could limit innovation and competitiveness within the digital asset sector.

Brian Armstrong has previously argued that allowing stablecoin rewards could help foster a more competitive financial ecosystem where users are able to earn returns on digital assets held on blockchain platforms.

Crypto firms contend that preventing rewards programs may disadvantage digital asset platforms when competing with traditional financial institutions that offer interest on deposits or other financial incentives.

As discussions over the CLARITY Act continue, the divide between industry advocates and regulators reflects broader tensions between financial innovation and consumer protection.

Banks warn about regulatory loopholes

Beyond the question of direct yield payments, policymakers are also examining whether platforms could circumvent restrictions introduced through the CLARITY Act by offering alternative incentives.

Some lawmakers worry that exchanges might replicate yield-like benefits through loyalty programs, membership rewards, or third-party partnerships without technically labeling them as interest.

Hill acknowledged that regulators may ultimately need to address these concerns through rulemaking once the CLARITY Act framework is finalized.

He suggested that the United States Department of the Treasury could play a role in developing guidelines to ensure both banks and non-bank stablecoin issuers follow similar standards regarding marketing practices, incentive structures, and product design.

Another key distinction highlighted during the CLARITY Act debate involves consumer protection. Traditional bank deposits are insured by the Federal Deposit Insurance Corporation, while cryptocurrency exchanges typically do not offer comparable protections.

Hill noted that most dollar-backed stablecoins are supported by reserves such as bank deposits or U.S. Treasury securities. However, despite these reserve structures, stablecoins operate differently from conventional bank accounts.

Momentum grows for clearer crypto regulation

Supporters of the CLARITY Act argue that clearer regulatory rules could help establish the United States as a more stable environment for digital asset innovation.

Paul Atkins said the CLARITY Act could provide the regulatory certainty needed for companies to build digital financial products within the United States.

For lawmakers, the challenge remains balancing technological innovation with safeguards designed to protect consumers and maintain financial stability.

As the digital asset industry continues to expand, the CLARITY Act is likely to remain central to ongoing policy discussions about how cryptocurrencies—and particularly stablecoins—should function within the broader financial system.