Will Restrictions on Stablecoin Returns in the US Push Capital Overseas?

If the proposed Clarify Act (CLARITY Act) in the United States truly restricts returns on capital for compliant stable tokens, there are concerns it could trigger capital outflows from the licensed US financial system to informal financial infrastructure, opaque financial products, and unregulated digital assets—known as “synthetic dollars.” This warning comes from industry stakeholders who see the potential long-term impact of such policies.

Impact of CLARITY Regulation: Threats to Lawful Institutions

Colin Butler, Market Director at Mega Matrix, expressed concern that banning compliant stable tokens from providing returns to asset holders will not protect the US financial ecosystem. Instead, it will sacrifice compliant institutions and accelerate cross-border capital movement to jurisdictions with looser oversight. The simple incentive logic: if legal products do not offer profits, investors will seek alternatives that do, regardless of risk or transparency levels.

How Other Countries Handle Returns on Digital Asset Capital

While the US considers restrictions, the global landscape is moving in the opposite direction. China’s digital renminbi (RMB) already offers interest features, incentivizing users to hold government-issued digital assets. Singapore, Switzerland, and the United Arab Emirates are actively developing comprehensive frameworks for digital assets that generate yields—part of a broader global competition for dominance in the digital financial ecosystem.

Under the existing GENIUS Act regulatory framework, stable payment tokens like USDC must be fully backed by US cash or short-term bonds. Interestingly, this regulation prohibits paying interest directly to holders, classifying these products as “digital money” rather than investment instruments.

Risks of Losing US Global Competitiveness

If the US continues to ban yield on compliant stablecoins, it risks diminishing its competitive position on the global stage. When other jurisdictions offer digital assets with yields and regulatory clarity, talent and capital will flow there. The consequences are not only short-term economic losses but also the loss of innovation momentum in the rapidly growing fintech and blockchain sectors.

This regulatory paradox reflects a common dilemma: how to balance consumer protection with industry competitiveness, especially when global players are not waiting for a single country’s decision.