Layer One: OpenTrade on stablecoins and the opportunity for yield-as-a-service providers

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by The Block's Kelvin Sparks and John Wu, President of Ava Labs, Layer One brings you inside the institutional conversations driving blockchain forward.

This week on the podcast, we were joined by Samantha Lewis, Partner at Mercury Fund, and David Sutter, CEO at OpenTrade, to discuss crypto's DIY roots, venture capital strategies, and how U.S. regulation is paving the way for yield platforms to thrive.

In this week's newsletter, we're taking a look at what the Clarity Act's recent progress could mean for these platforms, and what major hurdles are still in its way.

Stablecoin yield compromise revives Clarity Act momentum, but 2026 timeline remains unclear

The United States' crypto market structure legislation is one step closer to the finish line, as its stuttering progress through Congress continues. The Senate Banking Committee's Clarity Act passed a markup vote earlier this month, 15-9, with two Democrats breaking ranks to support the bill.

In a Truth Social post this week, President Trump reiterated his commitment to supporting the country's domestic crypto industry, promising evergreen legislation that "cannot be undone by the crypto haters."

However, despite enjoying support from the highest levels of government, the bill's progress has been anything but smooth, and its future remains uncertain. These so-called "crypto haters" include major traditional banks, who have repeatedly clashed with crypto industry advocates throughout the first half of this year.

Stablecoin yield has been the main point of contention, resulting in a months-long deadlock. The major concern for traditional banking institutions is that, if idle digital dollars pay out higher yields than money left in a bank account — which typically offer just a few basis points APY — this could lead to deposit flight, and a strain on their ability to offer loans. White House economists and Paul Grewal, Chief Legal Officer at Coinbase, have argued these risks are being significantly overblown.

Writing in the Wall Street Journal this month, Greg Ip went one step further, suggesting that stablecoin adoption could even lead to a new financial crisis. Drawing on comparisons to private dollars issued by independent banks and railway companies in the 19th century, Ip posited that competition to secure the best yields for users could drive stablecoin firms to experiment with risky assets, ultimately causing their tokens to depeg from the dollar.

Whether or not those concerns are justified, they necessitated some compromise in Congress. The current version of the bill stipulates that service providers are prohibited from paying out rewards that are "economically or functionally equivalent to [...] yield on an interest-bearing bank deposit." However, exceptions for activity-based rewards remain.

As major industry figures pointed out earlier this month, strong yield is an inevitable feature and function of digital assets. Sutter compares the resistance from the banking sector to "taxi cabs fighting against Uber": an old incumbent attempting to use its power to smother innovation at the expense of consumers. Ultimately, the industry will innovate around whatever roadblocks end up in its way.

OpenTrade itself is one such innovation. Rather than paying out rewards on stablecoin holdings directly, the platform instead aggregates a host of onchain yield sources, including tokenized TradFi funds and DeFi protocols, then offers them within a single API. This allows them to provide compliant, plug-and-play yield for digital asset and fintech platforms running on stablecoin rails.

Preventing stablecoin issuers from paying native yield while allowing for third-party solutions — what Sutter calls the "separation of church and state" — leaves the door open for yield-as-a-service providers to fill that gap in the ecosystem.

However, the terms could undergo further revisions before being written into law. And the last mile may yet prove the longest: the Clarity Act still needs to be combined with the existing DCIA bill, passed by the Senate Agriculture Committee in January. It will then face a vote on the Senate floor, where some lawmakers on both sides of the aisle will doubtless put up firm resistance over the absence of key conflict-of-interest provisions.

Analysts at TD Cowen warned this week that, with the furore over President Trump's own crypto connections showing little sign of receding, the chances of the bill passing this year remain low. Bettors on Polymarket are slightly more optimistic: the odds of a 2026 resolution are currently sitting at 57% on the platform.

Podcast Recap: OpenTrade and Mercury Fund on How Stablecoins Are Creating a New Financial System

In the Headlines: The stories driving the conversation this week

• Tickets are now available for the 2026 Avalanche Summit in New York City. The two-day event — scheduled for September 16-17 at Chelsea Industrial — will bring together builders, institutions, and investors from across the Avalanche ecosystem. Use promo code BLOCK15 at the checkout for a 15% discount.
• The White House has begun a review of the CFTC's prediction market rule proposals. This comes as part of a broader push from CFTC Chair Michael Selig, seeking to assert his agency's jurisdiction over prediction markets and push back on state-level efforts to restrict platforms. President Trump, himself a Selig ally, came under fire from the New York Times this week for his family's investments in several prediction market platforms.
• The SEC has delayed the rollout of its tokenized equities innovation exemptions, citing concerns over third-party issuers. The exemptions — covered in last week's newsletter — would see issuers of tokenized equities offered partial relief from registration requirements, freeing them up to operate in the U.S. A revised version of the rules, focused on "issuer-led tokens," is still expected to roll out in the coming months.

Top of the Charts: Bank deposit APYs have remained low for the past two decades

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