CLARITY Act Could Reshape Crypto Yields

From Hold-to-Earn to Use-to-Earn

A landmark piece of crypto legislation working its way through the US Senate could fundamentally change how investors earn returns on digital assets. The Digital Asset Market Clarity Act, widely known as the CLARITY Act, cleared the Senate Banking Committee on May 14 and is Congress's most serious attempt to end years of regulatory ambiguity for digital assets.

The Act's biggest outcome may be the creation of an entirely new market for "yield-as-a-service," according to Joe Vollono, chief commercial officer at stablecoin infrastructure firm STBL. At the centre of the debate is Section 404 of the proposed legislation, which would prohibit Digital Asset Service Providers and their affiliates from offering yield solely as a function of holding a digital asset.

Passive yield on stablecoin balances is banned under the bill's current formulation, meaning crypto platforms could no longer offer interest-like returns for simply holding dollar-backed stablecoins. The bill does, however, include a compromise that preserves activity-based rewards tied to transactions, payments, staking, or liquidity provision.

Vollono believes this means the industry will shift from a "hold-to-earn" to a "use-to-earn" model, with future markets relying more on proactive, regulatory-compliant yield strategies.

Institutional Capital on the Sidelines

Vollono, who spent more than seven years at Morgan Stanley and served at SIFMA on industry advocacy and market structure issues, argues that the implications of the CLARITY Act extend far beyond yield products themselves, and that regulatory clarity could finally unlock large-scale institutional participation in crypto markets.

Banks, asset managers, and pension funds have largely sat out direct exposure beyond spot Bitcoin ETFs because of unresolved legal questions about token classification and custody. The CLARITY Act aims to address that directly. The bill is designed to create clearer federal rules for digital assets and resolve years of conflict between the SEC and the CFTC over who regulates the industry.

The likely result, Vollono said, is the emergence of a middle layer of infrastructure providers focused on compliant yield generation, with many of those services powered by artificial intelligence acting as an orchestration layer for regulated capital flows. Potential beneficiaries include DeFi infrastructure providers, vault curators, collateral management platforms, automated treasury services, lending markets, and rewards systems.

Still, Vollono sees the eventual compromise as beneficial for incumbents rather than existentially threatening. "Smart incumbents are going to compete," he said, suggesting banks could eventually collateralize reserves to issue their own stablecoins and generate compliant yield under the CLARITY framework.

The White House is aiming for a July 4 finish for the CLARITY Act, though Senator Gillibrand has predicted its completion by the first week of August.

Sources:
CoinDesk: Clarity Act could usher in a new era of crypto yield-as-a-service
Latham and Watkins: US Crypto Policy Tracker
The Motley Fool: What the Clarity Act Means for Crypto