Ban on stablecoin profits, what will change?

The CLARITY Act, a cryptocurrency regulation bill being discussed in the U.S. Congress, is attracting attention as a stablecoin regulation, but an analysis suggests that the area that will actually be most affected may be the decentralized finance (DeFi) area.

According to cryptocurrency research firm 10xResearch, the core of this bill is to prohibit the practice of providing compensation in the form of returns or rewards for stablecoin balances. This means that stablecoins will be defined only as a pure payment method, not as an ‘on-chain savings product’.

Why this is important

“This means a clear centralization of profits,” said Markus Thielen, founder of 10xResearch. As profit-generating functions return to banks, money market funds, and regulated financial products, the competitiveness of native cryptocurrency platforms may weaken.

Initially, there was optimism that users would move to DeFi if centralized platforms were unable to provide returns. However, Thielen pointed out that this assumption is based on the premise that DeFi can avoid the same regulations.

In fact, the CLARITY framework is likely to be extended to the front-end interface and token model. In particular, if the fee generation or governance structure appears similar to that of stocks, it may be subject to regulation.

Major protocols affected

According to the report, decentralized exchanges such as Uniswap (UNI), SUSHI (SUSHI), and dYdX, as well as lending protocols such as AAVE and Compound (COMP), may face stricter restrictions on how they operate and distribute value. This is likely to lead to a decrease in trading volume, reduced liquidity, and weakened demand for tokens.

Historical context of DeFi regulation

Discussions on regulation of decentralized finance began in earnest after the ‘DeFi Summer’ of 2020. After the U.S. Securities and Exchange Commission (SEC) expressed interest in DeFi protocols in 2021, regulatory pressure continued, including sanctions on Tornado Cash in 2023 and sending Wealth Notices to Uniswap in 2024.

The CLARITY Act can be seen as an attempt to explicitly include stablecoins and DeFi within the regulatory framework within this trend. In particular, the standards for determining whether a token has the characteristics of a security are expected to become clearer.

Good news for infrastructure companies

On the other hand, for stablecoin infrastructure companies such as Circle (CRCL), this regulation is considered a “structural good news.” As stablecoins become more focused on their role as payment infrastructure, the position of issuers that comply with regulations may be strengthened.

Future outlook [AI analysis]

If the CLARITY Act is passed in its current form, the DeFi ecosystem will likely face significant restructuring pressure. It is expected that the number of protocols that will require a complete reexamination of the revenue generation model will increase.

In the short term, the price volatility of major governance tokens such as AAVE and UNI may increase, and in the mid to long term, there is a possibility that the token economy will be redesigned to comply with regulations. At the same time, the market dominance of regulation-friendly stablecoin issuers such as Circle is expected to further strengthen.

However, there is room for revision until the bill is finally passed, and the actual impact may vary depending on the response strategies of DeFi protocols.