Clarity Protocol redesigns stablecoin reward structure—ushering in a new era of interest prohibition and participatory incentives

Cryptocurrency regulations are approaching a new turning point. Section 404 of the Clarity Act aims to fundamentally reform the reward mechanisms of stablecoin platforms. Traditionally, many users found the interest earned from holding stablecoins attractive. However, the new law explicitly restricts interest payments derived from holdings, aiming to prevent stablecoins from functioning like traditional bank deposits.

What the complete ban on stablecoin holding interest means

This marks a significant shift from previous business models. Under the new framework introduced by the Clarity Act, passive income from simply holding assets will no longer be permitted. According to NS3.AI’s analysis, this transition will be the most comprehensive restriction on reward structures in the crypto industry to date.

Previously, many systems operated on the premise that “holding stablecoins automatically earns interest,” but eliminating this will significantly change the relationship between platforms and users. Regulatory authorities clearly intend to prevent the lending of cryptocurrencies and the financialization of these assets.

Reward mechanisms shifting toward trading, liquidity, and governance activities

So, what is permitted instead? The new law opens the door for incentives tied to active market participation. Specifically, rewards for trading activities, compensation for liquidity pool providers, and participation rewards for governance voting—actions directly related to protocol management—are allowed.

This shift is not merely a rule change but a redefinition of the role of stablecoins themselves. Users will be required to transition from passive earners to active participants contributing to the maintenance of protocols.

Transparency and compliance challenges faced by platform operators

The new regulatory environment imposes considerable burdens on platform operators. Regulations mandate transparent disclosure of all reward programs. It is necessary to clearly explain the extent of involvement by issuers, the sources of rewards, and other relevant details.

Furthermore, existing partnerships and collaborations will need to be reviewed. When platform collaborations involve reward distribution, new compliance checks will be required. This process is likely to lead to structural adjustments across the entire stablecoin market, making regulatory compliance capabilities a new competitive factor.

Rebuilding reward structures under the Clarity Act may cause short-term disruptions but could also serve as a turning point toward a more transparent and sustainable crypto financial system.