Clarity Act stablecoin yield limitations will be meaningless in a couple years

The banks think they've won, but anyone with a brain knows that "risk-free" is always just a marketing message and as such, can still be sold to users to attract stablecoin deposits.

The fact that the Clarity Act, which is now reported to be likely to become law, restricts crypto platforms from offering yields on idle stablecoin balances, doesn't mean that said platforms cannot still capture the market searching for safe yield.

The crypto ecosystem only has to solve smart contract security problems and the idea of limitations across all products will become simply "concepts" that are never evident.

Think about it.

The compromise is that crypto platforms can offer yield, so long as the stablecoins have active exposure, not just balances sitting in a wallet.

The crypto industry representatives accept this compromise and I can understand why.

The clarity of not getting risk-free yield on your dollars without using a bank, is what this ACT is, essentially, as echoed by Helius Labs CEO Mert Mumtaz.

But there's a loophole, still, to offer yield that is very close to as safe as simply holding stablecoin balances and that's liquidity pools.

I know, any long time crypto user would immediately think "no, that's not remotely safe yield" and I understand where this conclusion comes from but hear me out.

There are different ways to execute incentivized liquidity pools and keep it safe for users.

Since we are essentially trying to achieve low exposure to capital risks, these pools will need to be stablecoin pools.

A recently frequent in the news solution called liquid tokens can come in handy here.

A product can be built around them.

Users deposit USDC stablecoin for instance, get USDC liquid (USDCL).

Proceed to provide liquidity to a USDCL+USDC pool.

Provided those tokens remain there, they will keep earning yield and the platform can leverage the initial USDC that was deposited to mint USDCL for whatever they want.

So we basically have one token with two markets where the primary pools literally maintain the stability of the liquid tokens.

Users don't have to worry about losing their capital because they are still holding the same token, just the liquid version which holds the peg 1:1. And their active market exposure isn't one that can cost them much, especially comparable to yield because the pool they are in is of two stablecoins that are effectively the same.

This is risk free, as far as the "risk free" is defendable as true for any market, at any time.

So yes, the banks are stupid to think the ecosystem won't always have a means to offer competitive yield and broader solutions for the global market. As finance moves on-chain, they will need more than trying to use the legal system to secure their profits, their pockets will run dry if that's all the tricks they have to compete.

Posted Using INLEO