CLARITY Act Reshapes Stablecoin Yield Economics

Original Author: @BlazingKevin_, Researcher at Blockbooster

On May 14, 2026, the U.S. Senate Banking Committee passed the CLARITY Act with a bipartisan vote of 15-9.

The most significant content within this "legislative progress" is Section 404 of the bill text. This section, redrafted by Senators Thom Tillis and Angela Alsobrooks in a compromise text released on May 1, accomplishes two things that the GENIUS Act did not:

First, it expands the stablecoin yield ban to all Digital Asset Service Providers (DASPs) and their affiliates — including centralized exchanges, brokers, dealers, and custodians. The GENIUS Act, when signed in July 2025, only constrained "stablecoin issuers" (PPSI/FPSI). All compliance workarounds used by Coinbase, Anchorage Digital Neo Ltd., etc., which offered users 3.5%-5% yields through a "non-issuer interest payment" path, are shut down by Section 404.

Second, it explicitly introduces a legal dichotomy of "passive yield vs. activity-based rewards". Section 404 prohibits rewards that are "functionally or economically equivalent to bank deposit interest" — i.e., yield generated automatically solely based on holding — but preserves rewards "based on genuine activity or transactions," such as staking, market making, credit card cashback, and merchant transaction rewards.

Together, these two changes constitute a paradigm shift. The stablecoin industry is moving from a market of paying interest for holding to a market of paying interest for using.

Meanwhile, over the past month, the three largest asset management institutions on Wall Street (Morgan Stanley, BlackRock, JPMorgan) have almost simultaneously launched money market fund products tailored for stablecoin reserve requirements. Morgan Stanley's MSNXX was established on April 16 and publicly announced on April 23; BlackRock filed for two tokenized funds, BSTBL and BRSRV, simultaneously on May 8; JPMorgan filed JLTXX on May 12. These three firms launched products with highly similar functional positioning within almost 28 days of each other.

The timing is certainly no coincidence. We believe: The anticipation of the impending passage of CLARITY Section 404 is pushing the stablecoin yield economy towards a new paradigm – the 'hold-to-earn' path is being narrowed, the 'use-to-earn' path is preserved, and tokenized money market funds, as compliant yield-bearing instruments for stablecoin reserves, are becoming the most stably benefiting compliant yield layer in this new paradigm.

The concentrated product filings by Wall Street asset management giants in April-May represent an industrial positioning move for this paradigm shift. It should be clarified: CLARITY has only currently passed the Senate Banking Committee; there is still a long way to go before Presidential signature, but market expectations are already restructuring in this direction.

This article will start by reconstructing the timeline, dissecting the relay legal structure of GENIUS and CLARITY, and analyzing why the tokenized reserve asset layer is emerging as the most robust compliant yield channel in the new paradigm.

1. 30 Days of Industrial Positioning

1.1 April 16: Morgan Stanley's Opening Move

Let's go back to the earliest event first.

On April 16, 2026, Morgan Stanley's Stablecoin Reserves Portfolio (ticker: MSNXX) was officially established.

MSIM publicly announced the product on April 23.

The product positioning of MSNXX is very precise. The official statement reads: "This fund offers compliant stablecoin issuers a qualified money market fund option, allowing them to invest in the reserve assets required to back their outstanding stablecoins."

MSNXX is a product tailored for reserve asset requirements – investing in cash, U.S. Treasuries with maturities under 93 days, and overnight repurchase agreements collateralized by Treasuries.

However, MSNXX is not a tokenized product; it does not trade on-chain. Morgan Stanley's product strategy is conservative – providing only a traditional MMF wrapper, allowing stablecoin issuers to invest through traditional financial channels.

This is the first publicly announced product "specifically designed for stablecoin reserve needs" from a Wall Street asset management giant. Not revolutionary in itself, but it sent a clear signal: the demand for stablecoin reserves has grown large enough for asset management giants to dedicate a specific fund.

1.2 May 8: BlackRock's "Dual Filing"

Twenty-two days later, BlackRock filed two separate registration statements with the SEC simultaneously: the BlackRock Select Treasury Based Liquidity Fund tokenized version (BSTBL) and the BlackRock Daily Reinvestment Stablecoin Reserve Vehicle (BRSRV).

The design of these two products contrasts sharply with MSNXX. BSTBL is a tokenized version of BlackRock's existing Select Treasury Liquidity Fund. It serves traditional institutional cash managers – clients who already bought this fund, now with an additional on-chain distribution channel.

BRSRV, on the other hand, is a newly created tokenized money market fund, distributed multichain by Securitize, targeting only one customer group: stablecoin issuers.

The key difference between BlackRock and Morgan Stanley lies in tokenization. BlackRock chose to issue the same assets (short-term Treasuries + cash + overnight repos) as on-chain shares to stablecoin issuers, giving the reserve assets themselves on-chain composability, 24/7 transferability, and the potential for integration with DeFi protocols. This is a product form tailor-made for crypto-native clients (e.g., Ethena, Jupiter).

The BSTBL + BRSRV filing extends BlackRock's existing product matrix, expanding the tokenization infrastructure from BUIDL's "DeFi collateral" use case to BRSRV's "stablecoin reserve asset" use case.

1.3 May 12: JPMorgan's Second Entry

Four days later, JPMorgan filed with the SEC for the JPMorgan OnChain Liquidity-Token Money Market Fund (JLTXX).

The fund itself invests in U.S. Treasuries and overnight repurchase agreements collateralized by Treasuries or cash, with underlying assets identical to BUIDL, BSTBL, and BRSRV. The Token Class Shares are dated May 13.

JLTXX is not JPMorgan's first on-chain MMF. As early as December 15, 2025, JPMorgan Asset Management had already launched My OnChain Net Yield Fund (MONY) on Ethereum. MONY is a 506(c) private fund, available only to qualified investors.

This means JPMorgan already had nearly 5 months of operational experience in the tokenized MMF track. JLTXX is not a catch-up product, but the second step in JPMorgan's on-chain MMF strategy – expanding a product previously limited to 506(c) qualified investors into a registered fund available to a broader customer base, specifically targeting the stablecoin reserve use case.

On one hand, JPMorgan, along with Bank of America, Wells Fargo, and Citigroup, explored launching a joint syndicated stablecoin in 2025. On the other hand, through its product matrix from MONY to JLTXX, it deeply positions itself in the tokenized reserve asset track. Regardless of the OCC's final ruling, JPMorgan has a product in place – this dual-track approach reflects JPMorgan's unique strategic space as a GSIB bank and asset management firm.

1.4 May 14: The CLARITY Act Stamps the Entire Track

On May 14, the Senate Banking Committee passed the CLARITY Act with a bipartisan vote of 15-9.

It's worth pondering: Morgan Stanley's MSNXX, BlackRock's BSTBL/BRSRV, JPMorgan's JLTXX – these products were all being prepared before the CLARITY Section 404 compromise text was made public.

In fact, since the first stalling of CLARITY in January 2026, the asset management industry knew two things clearly: First, the "hold-to-earn" stablecoin reward path would eventually be shut down. Second, stablecoin reserve assets must exist, must be compliant, and will inevitably yield interest.

Combining these two points: When the 'hold-to-earn' path is narrowed, one of the most robust 'indirect yield' transmission paths is through the reserve asset layer – the stablecoin issuer itself does not pay interest, but its reserve's tokenized money market fund legally pays interest to the issuer, who then decides how to pass part of this yield to users within a compliant framework.

The asset management giants' products are the infrastructure prepared for this "most robust compliant yield channel."

2. Why CLARITY Is Much More Important Than GENIUS

2.1 The Limited Scope of the GENIUS Act

To understand the paradigm-shifting effect of Section 404, you must first precisely understand what it expands upon – GENIUS Act 4(a)(11).

The GENIUS Act, signed into law in July 2025, stipulates that a qualified stablecoin issuer or foreign stablecoin issuer shall not pay any form of interest or yield to stablecoin holders.

That is, the GENIUS Act itself does not distinguish between "passive yield" and "activity-based rewards"; any form of interest or yield paid by an issuer to a holder is entirely prohibited.

Secondly, its binding object is solely the issuer itself, excluding third parties like exchanges, wallets, custodians, and affiliates.

This second limitation created a regulatory loophole – known in the industry as "pass-through evasion." The entire stablecoin industry in 2025-2026 essentially operated within this loophole, seeking compliant innovation space:

• Coinbase / Kraken Model: Exchange distributes rewards. USDC is issued by Circle, but Coinbase offers approximately 4% rewards to USDC holders through the Coinbase One subscription model.
• Gemini Credit Card Model: Rewards triggered by external merchant transactions. GUSD is issued by Gemini Trust Company, but Gemini credit card holders receive GUSD cashback when spending at merchants.
• Anchorage Digital Neo Model: Rewards paid through a separate affiliated legal entity. USDtb is issued by Anchorage Digital Bank, but Anchorage Digital Neo Ltd. (a separate legal entity) pays the rewards.

These three models together formed the "indirect interest payment" ecosystem of the GENIUS era.

But the entire compliance foundation for all this was the limited scope of the GENIUS Act constraining only issuers.

2.2 The Substantive Expansion of CLARITY Section 404

The CLARITY Act Section 404 does the two things the GENIUS Act did not.

First: Expansion to DASPs and Affiliates

Section 404's binding object is no longer limited to stablecoin issuers, but expands to "covered digital asset service providers and their affiliates." This scope explicitly covers centralized exchanges, brokers, dealers, and custodians.

This expansion immediately closes all the compliance paths used by Coinbase, Kraken, Gemini, Anchorage Digital Neo, etc., which relied on "non-issuer interest payment." Coinbase, as a DASP, can no longer distribute hold-only USDC rewards; Anchorage Digital Neo can no longer pay USDtb rewards.

Second: Introducing the "Passive vs. Active" Dichotomy

Section 404 prohibits DASPs from providing yields that are "functionally or economically equivalent to bank deposit interest," but preserves rewards "based on genuine activity or transactions."

This means any reward tied to "consumption, trading, staking, transfer" can survive, while any reward that scales linearly with idle balances cannot.

Together, these two things constitute a complete paradigm shift. All the "indirect interest payment" templates of the GENIUS era are either shut down or must be redesigned in the CLARITY era.

The stablecoin industry is moving from a market of paying interest for holding to a market of paying interest for using.

2.3 The Winning Paths in the Paradigm Shift

In the use-to-earn paradigm, there are three possible paths for transmitting yield to users.

Path A: Redesign rewards as activity-based

Applicable objects: Exchanges, wallets, credit cards. Coinbase could change USDC rewards from "hold-and-earn" to "based on trading frequency/consumption amount." Gemini is already using the credit card cashback model.

The key issue isn't whether Path A can retain users, but its design cost – Coinbase would need to restructure the entire legal framework and product UI for its rewards system, with every active design needing to pass a facts and circumstances test by the SEC/CFTC. This restructuring could take 6-12 months, during which user attrition is a real risk. However, in the medium term, Path A could fully recover and even surpass the attractiveness of the hold-to-earn era.

Path B: Retain yield at the protocol layer, passing it to users through activity-based operations

Applicable objects: DeFi protocols. Section 404's definition of "covered digital asset service provider" is clearly constructed around centralized intermediaries – yield generated by non-custodial smart contracts – e.g., supplying USDC to Aave for variable rate lending – is structurally not within this defined scope.

This means a user depositing USDC into the Aave lending pool to earn a variable rate is, under most current legal scholars' interpretations, compliant – CLARITY seemingly inadvertently leaves a yield channel open for non-custodial DeFi.

However, this exemption carries significant uncertainty. If final rules extend the concept of "economic equivalence" to non-custodial DeFi, or define DeFi front-ends as affiliates, Path B's exemption could be substantially narrowed.

Path C: Paying yields through the reserve asset layer

This is the path Wall Street asset management giants are betting on. The specific mechanism: the stablecoin issuer itself does not pay interest, DASPs do not pay interest, but the stablecoin's reserve assets are tokenized money market funds. The fund legally pays interest to its holders (i.e., the stablecoin issuer). The stablecoin issuer then retains this distributed yield as corporate profit – or passes part of it to users by designing active behavior rewards.

Key compliance advantage of this path: The yield layer is not at the stablecoin layer, nor the DASP layer, but at the underlying fund layer – completely separate from the stablecoin regulatory framework.

These three paths are not mutually exclusive; they will evolve simultaneously.

Path A might find new life in the hands of players like Coinbase who have retail brands and distribution channels;

Path B might become an unexpected boon for protocols like Aave, Pendle (but with tail risk of regulatory tightening in the next 12 months);

Path C is the path least directly threatened by Section 404, but requires the premise that the OCC's 20% cap does not pass.

Path C is the "most stably benefiting" compliant yield layer, but not the "only benefiting" one.

This is why Wall Street asset management giants concentrated their filings of tokenized money market funds in April-May. They are providing one piece of compliant yield infrastructure for the use-to-earn paradigm that CLARITY Section 404 is about to solidify. Considering the implementation costs and regulatory uncertainties of Paths A and B, Path C has the strongest risk-adjusted appeal – this is the industry assessment by the likes of BlackRock.

2.4 The Collaborative Relationship Between Path B and Path C

There seems to be potential for collaboration between Path B and Path C. A complete on-chain yield system could leverage both paths simultaneously:

• Reserve asset layer uses BUIDL – ensuring the source of compliant yield
• User layer uses Aave lending or Pendle yield splitting – ensuring the "yield" perceived by users comes from active operations

This dual-layer structure – "BUIDL at the base, DeFi protocols on the surface" – could theoretically build a use-to-earn system that is both compliant and user-friendly. When BlackRock launched BUIDL, it clearly did not specifically foresee Section 404, but this product coincidentally becomes the optimal base layer for a use-to-earn system under the new paradigm.

3. BlackRock's Three-Layer Product Matrix – Infrastructure for the New Paradigm

3.1 Three Products, Three Customer Groups

To understand BlackRock's strategy, you need to put its three tokenized fund products on the table simultaneously for comparison:

BUIDL: Launched March 2024, natively built