On May 14, 2026, the US Senate Banking Committee passed the CLARITY Act in a 15–9 bipartisan vote.

The most important element of this “legislative milestone” is Section 404 of the bill text. Redrafted by Senators Thom Tillis and Angela Alsobrooks in the compromise text released on May 1, Section 404 does two things the GENIUS Act did not.

First, it extends the stablecoin yield prohibition to all Digital Asset Service Providers (DASPs) and their affiliates—including centralized exchanges, brokers, dealers, and custodians. When the GENIUS Act was signed in July 2025, it only constrained “stablecoin issuers” (PPSIs/FPSIs). Section 404 now closes every compliance workaround that ran through “non-issuer payment” routes, including the channels Coinbase and Anchorage Digital Neo Ltd. had used to continue delivering 3.5–5% yields to users.

Second, it introduces an explicit legal dichotomy between “passive yield” and “activity-based rewards.” Section 404 prohibits rewards “functionally or economically equivalent to bank deposit interest”—yields that accrue automatically from mere holding—while preserving rewards tied to “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 hold-to-earn market to a use-to-earn market.

Over the same period, the three largest Wall Street asset managers—Morgan Stanley, BlackRock, and JPMorgan—have launched nearly synchronized money market fund products tailored to stablecoin reserve needs. Morgan Stanley’s MSNXX was established on April 16 and publicly announced on April 23; BlackRock filed BSTBL and BRSRV, two tokenized funds, on May 8; JPMorgan filed JLTXX on May 12. Three asset managers rolled out functionally near-identical products within a 28-day window.

This timing is no coincidence. In our view, the expectation of CLARITY Section 404’s imminent passage is pushing the stablecoin yield economy into a new paradigm—the hold-to-earn channel is being narrowed, the use-to-earn channel is being preserved, and tokenized money market funds, serving as compliant interest-bearing instruments for stablecoin reserves, are emerging as the most robustly positioned compliant yield layer in this new paradigm.

The products that Wall Street’s leading asset managers filed in April and May represent industry positioning for this paradigm shift. To be clear: CLARITY has so far only cleared the Senate Banking Committee and remains some distance from presidential signature, yet market expectations are already reorganizing along this trajectory.

This note begins by reconstructing the timeline, unpacks the relay legal architecture linking GENIUS and CLARITY, and analyzes why the tokenized reserve asset layer has emerged as the most robust compliant yield channel in the new paradigm.

1. Industry Positioning Within 30 Days

1.1 April 16: Morgan Stanley Opens the Sequence

We begin with the earliest event.

On April 16, 2026, Morgan Stanley’s Stablecoin Reserves Portfolio (ticker: MSNXX) was officially established. MSIM publicly announced the product on April 23.

MSNXX’s product positioning is highly precise. The official statement reads: “This fund provides compliant stablecoin issuers with a qualified money market fund option, allowing them to invest in the reserve assets needed to back circulating stablecoins.”

MSNXX is tailored to reserve asset requirements—investing in cash, US Treasuries with maturities of 93 days or less, and overnight repos collateralized by Treasuries.

But MSNXX is not a tokenized product and does not trade on-chain. Morgan Stanley’s product strategy is conservative—offering only a traditional MMF wrapper that requires stablecoin issuers to invest through conventional financial channels.

This is the first publicly announced product from a major Wall Street asset manager specifically designed for stablecoin reserve needs. The product itself is not revolutionary, but the signal is clear: stablecoin reserve demand has grown large enough that asset management giants are willing to dedicate an entire fund to it.

1.2 May 8: BlackRock’s “Dual Filing”

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

The design of these two products stands in sharp contrast to MSNXX. BSTBL is a tokenized version of BlackRock’s existing Select Treasury Based Liquidity Fund, serving traditional institutional cash managers—existing clients of the fund who now gain an additional on-chain distribution channel.

BRSRV, by contrast, is a newly created tokenized money market fund distributed multi-chain by Securitize, targeting a single client segment: stablecoin issuers.

The key difference between BlackRock and Morgan Stanley lies in tokenization. BlackRock has chosen to issue the same underlying assets (short-dated Treasuries + cash + overnight repos) to stablecoin issuers via on-chain shares, giving the reserve assets themselves on-chain composability, 24/7 transferability, and potential integration with DeFi protocols. This product format is tailored for crypto-native clients such as Ethena and Jupiter.

The BSTBL and BRSRV filings extend BlackRock’s existing product matrix, expanding tokenized 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 registration for the JPMorgan OnChain Liquidity-Token Money Market Fund (JLTXX) with the SEC.

The fund invests in US Treasuries and overnight repo agreements collateralized by Treasuries or cash—underlying assets identical to BUIDL, BSTBL, and BRSRV. Token Class Shares carry a stated date of May 13.

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

This means JPMorgan already has nearly five months of operating experience in the tokenized MMF space. JLTXX is not a catch-up product but the second step in JPMorgan’s on-chain MMF strategy—extending what had been restricted to 506(c) qualified investors into a registered fund accessible to a broader client base, with a specific focus on the stablecoin reserves use case.

JPMorgan is positioning on both sides of the regulatory question. On one front, it explored issuing a joint consortium stablecoin with Bank of America, Wells Fargo, and Citigroup in 2025; on the other, it is positioning deeply in tokenized reserve assets via the MONY → JLTXX product matrix. Whatever the OCC ultimately decides, JPMorgan will have a product in place—a two-sided positioning made possible by its unique strategic footprint as both a GSIB bank and an asset manager.

1.4 May 14: The CLARITY Act Stamps the Entire Track

On May 14, the Senate Banking Committee passed the CLARITY Act in a 15–9 bipartisan vote.

Worth pausing on: Morgan Stanley’s MSNXX, BlackRock’s BSTBL and BRSRV, and JPMorgan’s JLTXX were all in preparation before the CLARITY Section 404 compromise text became public.

In fact, ever since CLARITY was first shelved in January 2026, the asset management industry has understood two things: first, the “hold-to-earn” stablecoin reward pathway would eventually be closed; second, stablecoin reserve assets must exist, must be compliant, and will inevitably generate yield.

Combining these two points: once the hold-to-earn pathway is narrowed, one of the most robust “indirect yield” delivery channels runs through the reserve asset layer—the stablecoin issuer itself does not pay interest, but the tokenized money market fund holding its reserves legally pays interest to the issuer, who then decides how to pass that yield through to users within a compliant framework.

The asset management giants’ products are the infrastructure built for this “most robust compliant yield channel.”

2. Why CLARITY Matters Much More Than GENIUS

2.1 The Limited Scope of the GENIUS Act

To understand Section 404’s paradigm-shift effect, we first need to understand precisely what it extends: GENIUS Act Section 4(a)(11).

The GENIUS Act was signed into law in July 2025. It provides that compliant stablecoin issuers and foreign stablecoin issuers may not pay any form of interest or yield to stablecoin holders.

In other words, the GENIUS Act itself does not distinguish between “passive yield” and “activity-based rewards”—any interest or yield paid by the issuer to a holder, in any form, is prohibited.

Second, its scope is limited to the issuer itself and does not extend to third parties such as exchanges, wallets, custodians, or affiliates.

This second limitation created a regulatory loophole—known within the industry as “pass-through evasion.” The 2025–2026 stablecoin industry has, in essence, been operating inside this loophole in search of compliant innovation:

• Coinbase / Kraken model: the exchange distributes the rewards. USDC is issued by Circle, but Coinbase delivers approximately 4% rewards to USDC holders through the Coinbase One subscription program.

• Gemini credit card model: rewards are 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: payment runs 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.

Together, these three models form the GENIUS-era “indirect interest payment” ecosystem.

But the entire compliance basis for this ecosystem rests on a single feature of the GENIUS Act—its narrow scope constrains only issuers.

2.2 The Substantive Expansion in CLARITY Section 404

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

First: extending to DASPs and affiliates.

Section 404’s scope is no longer limited to stablecoin issuers; it extends to “covered Digital Asset Service Providers and their affiliates.” This explicitly covers centralized exchanges, brokers, dealers, and custodians.

This extension immediately closes all “non-issuer payment” compliance pathways used by Coinbase, Kraken, Gemini, and Anchorage Digital Neo. As a DASP, Coinbase can no longer distribute hold-only USDC rewards; Anchorage Digital Neo can no longer pay USDtb rewards.

Second: introducing the “passive vs. activity” dichotomy.

Section 404 prohibits DASPs from offering rewards “functionally or economically equivalent to bank deposit interest” while preserving rewards “based on genuine activity or transactions.”

This means any reward linked to “spending, trading, staking, or transfers” can survive, while any reward that grows linearly with idle balances cannot.

Together, these two changes constitute a complete paradigm shift. Every “indirect interest payment” template from the GENIUS era will either be closed under CLARITY or require redesign.

The stablecoin industry is moving from a hold-to-earn market to a use-to-earn market.

2.3 The Winning Pathways in the Paradigm Shift

Under the use-to-earn paradigm, three potential pathways exist for delivering yield to users.

Path A: Redesigning rewards as activity-based.

Applicable to: exchanges, wallets, and credit cards. Coinbase may convert USDC rewards from “earned by holding” to “based on transaction frequency or spending volume.” Gemini is already using the credit card cashback model.

The key question is not whether Path A can retain users but its design cost—Coinbase would need to restructure its entire rewards system’s legal framework and product UI, with each active design subject to fact-based testing by the SEC and CFTC. Such restructuring takes 6–12 months, during which user attrition is a real risk. Over the medium term, however, Path A could fully recover or even exceed the appeal of the hold-to-earn era.

Path B: Keeping yield at the protocol layer, delivered to users via activity-based operations.

Applicable to: DeFi protocols. Section 404’s definition of “covered Digital Asset Service Providers” is constructed explicitly around centralized intermediaries—yields generated by non-custodial smart contracts, such as supplying USDC to Aave for variable-rate lending, fall outside that definition by design.

This means users depositing USDC into Aave’s lending pool to earn variable rates is, in the reading of most legal scholars, currently compliant—CLARITY has, on the surface, inadvertently left a yield channel open for non-custodial DeFi.

But this exemption carries significant uncertainty. If the final rules extend the “economically equivalent” concept to non-custodial DeFi, or define DeFi front-ends as affiliates, the Path B exemption could be materially narrowed.

Path C: Paying yield through the reserve asset layer.

This is the pathway Wall Street’s asset management giants are betting on. The mechanics: the stablecoin issuer pays no interest, DASPs pay no interest, but the stablecoin’s reserve assets are tokenized money market funds, and the fund legally pays interest to its holders (the stablecoin issuer). Once the issuer receives the fund’s distributions, it either retains them as corporate profit or partially passes them through to users via active-behavior reward designs.

The key compliance advantage: the yield layer sits neither at the stablecoin level nor at the DASP level, but at the underlying fund level—outside the stablecoin regulatory framework altogether.

These three pathways are not mutually exclusive; they will evolve in parallel.

• Path A may find new life in the hands of players with retail brands and distribution channels, such as Coinbase.

• Path B may deliver an unexpected tailwind for protocols such as Aave and Pendle (though with tail risk from regulatory tightening over the next 12 months).

• Path C faces the smallest direct threat from Section 404, but only if the OCC’s 20% cap fails to pass.

Path C is the “most robustly positioned” compliant yield layer, but not the “only beneficiary.”

This is why Wall Street’s asset management giants concentrated their tokenized money market fund filings in April and May. They are providing one of the compliant yield infrastructures for the use-to-earn paradigm that CLARITY Section 404 is about to formalize. Given the implementation costs and regulatory uncertainty around Paths A and B, Path C carries the strongest risk-adjusted appeal—this is the industry judgment of BlackRock and its peers.

2.4 The Complementarity Between Path B and Path C

Path B and Path C appear to have collaborative potential. A complete on-chain yield system can leverage both pathways simultaneously:

• The reserve asset layer uses BUIDL—anchoring the source of compliant yield.

• The user layer uses Aave lending or Pendle yield splitting—ensuring that the “yield” users experience comes from active operations.

This two-layer structure—”BUIDL at the base, DeFi protocols at the surface”—can in theory construct a use-to-earn system that is both compliant and user-friendly. BlackRock clearly did not specifically foresee Section 404 when launching BUIDL, but the product has emerged as the optimal base layer for use-to-earn systems under the new paradigm.

3. BlackRock’s Three-Tier Product Matrix: Infrastructure for the New Paradigm

3.1 Three Products, Three Customer Segments

To understand BlackRock’s strategy, its three tokenized fund products need to be compared side by side.

BUIDL: Launched March 2024, natively built on Ethereum. The legal structure is a BVI fund, with custody provided by Securitize.

Target clients: DeFi protocols, crypto-native institutions, and on-chain use cases that require BUIDL as collateral. BUIDL has been accepted as eligible collateral on lending protocols, including Aave. Minimum investment: $5mn.

BSTBL: Filed May 8, 2026. The legal structure is a US SEC-registered government money market fund, with BNY Mellon Investment Servicing as transfer agent.

Target clients: traditional institutional cash managers—existing clients of BlackRock funds who can now access 24/7 trading capability via on-chain shares.

BRSRV: Filed May 8, 2026. The legal structure is a newly created money market fund, distributed multi-chain by Securitize.

Target clients: stablecoin issuers—tailored for compliant reserve requirements under the GENIUS Act.

These three products coexist in the market with entirely non-overlapping client bases. This is a tiered product matrix: the same underlying assets (short-dated Treasuries + cash + overnight repos), packaged through different legal wrappers, different custody structures, and different distribution channels, sold to three completely different client segments.

More importantly, these three products jointly constitute a complete tokenized reserve asset ecosystem, covering every requirement under the use-to-earn paradigm: BUIDL as collateral and a composable asset at the DeFi protocol layer; BSTBL as an on-chain cash management tool for traditional institutions; BRSRV as the core holding at the stablecoin issuer’s reserve asset layer. Whatever the specific design of the use-to-earn system turns out to be, BlackRock already has the corresponding tokenized reserve asset product ready.

4. 90% Concentration: An Overlooked Systemic Risk in the CLARITY Paradigm Shift

We now quantify the current concentration risk in BlackRock’s BUIDL.

When USDtb launched on December 16, 2024, the official partnership announcement from Ethena and BlackRock stated explicitly: “BUIDL accounts for more than 90% of USDtb reserves. This is the largest allocation to BUIDL of any stablecoin.”

After JupUSD launched on January 6, 2026, its reserve structure was 90% USDtb + 10% USDC as a liquidity buffer.

The implied concentration: BUIDL alone backs approximately 90% of USDtb’s reserves and, indirectly, approximately 81% of JupUSD’s reserves (90% of USDtb × 90% of JupUSD).

USDtb peaked at approximately $1.2bn in circulation (June 2025 data), and JupUSD has grown rapidly since its January 2026 launch. This means the health of a single fund—BUIDL—directly determines the solvency of at least two significant stablecoins. If BUIDL faces large-scale redemption pressure, the reserve assets of downstream USDtb and JupUSD would fail simultaneously.

The CLARITY paradigm shift further amplifies this concentration risk.

5. The OCC 20% Reserve Asset Cap Battle: Deciding Which of Paths A, B, C Prevails

5.1 The Cap Proposal and the Opposition

On March 2, the US Office of the Comptroller of the Currency (OCC) published a 376-page proposal in the Federal Register as part of the GENIUS Act implementing rules. One element triggered industry-wide debate: as a possible alternative threshold, the OCC explored whether to set a 20% cap on “tokenized assets” within the reserve assets of Federally chartered Payment Stablecoin Issuers (PFSIs).

Although the 20% figure was raised by the OCC merely as one option for discussion during the comment period, market participants are already treating this alternative threshold as a strong signal of regulatory intent.

If implemented, the cap would mean PPSIs could place at most 20% of reserve assets in tokenized funds (such as BUIDL, JLTXX, and BRSRV), with the remaining 80% required to sit in traditional non-tokenized assets.

If passed, the 20% cap would directly impair the scalability of the tokenized reserve asset layer.

5.2 A Zero-Sum Battle That Decides the Pathway Winner

The true significance of the OCC’s 20% cap: among the three yield channels (Paths A, B, and C) in the CLARITY paradigm shift, this is the critical variable that decides whether Path C can scale.

The pro-cap camp consists of JPMorgan, Bank of America, Wells Fargo, and Citigroup—the four banks that in 2025 announced they were exploring the possibility of jointly issuing a stablecoin. If the 20% cap passes, 80% of PPSI reserve assets must sit in traditional assets, meaning the bulk of reserve capital would flow back into the banking deposit system, with these four banks as the primary beneficiaries.

The anti-cap camp consists of asset management giants including BlackRock, Vanguard, and State Street. If the cap is eliminated or substantially loosened, PPSI reserves could sit entirely in tokenized money market funds (including BUIDL, BSTBL, and BRSRV), with these asset managers as the primary beneficiaries. Path C opens fully.

5.3 How the Game Changes After CLARITY’s Passage

The CLARITY Act’s passage through the Senate Banking Committee on May 14 introduces a critical variable into the OCC 20% cap battle.

CLARITY grants explicit legal status to tokenized securities—indirectly undermining the OCC’s argument that “tokenized assets carry special risks and require additional limits.” If CLARITY confers legal status on tokenized funds, the OCC’s rationale that “the tokenized form itself carries special risks” no longer holds.

Once CLARITY and GENIUS form a complete framework, the OCC will likely have to adjust its 20% alternative threshold. The most probable outcome: the threshold is eliminated or substantially loosened. This would represent a partial victory for the “principles-based” approach BlackRock has favored.

But one issue must be confronted directly: Path C’s scaling victory and the systemic concentration risk discussed in Section 4 are two sides of the same coin. If the OCC 20% threshold is loosened, BUIDL-class funds would rapidly absorb tens of billions—even hundreds of billions—of dollars in stablecoin reserve assets, validating the industry value BlackRock and its peers have wagered on. At the same time, BUIDL’s single-point-of-failure risk, reflexive run risk, and the “pyramidal concentration” risk to the crypto-dollar economy would all expand in lockstep.

Put differently, Path C’s victory is BlackRock’s win in industry terms, but in systemic terms, it marks the birth of a new form of concentration risk.

Traditional finance manages this kind of scale concentration through SIFMU designations, CCAR stress tests, and DTCC contingency mechanisms. The on-chain tokenized reserve asset layer currently has no equivalent machinery. If Path C does win, it will arrive alongside a window—the time it takes for the regulatory framework to catch up with the concentration risk. Whether the FSOC begins to engage with this concentration issue in 2027–2028 is a policy variable worth tracking.

Conclusion

The entire stablecoin yield economy is being forcibly reset from “hold-to-earn” to “use-to-earn,” and tokenized money market funds—as the underlying reserve assets—are emerging as one of the most robustly positioned compliant yield infrastructures of the new paradigm.

The product positioning of Wall Street’s asset management giants—MSIM’s MSNXX, BlackRock’s BSTBL and BRSRV, and JPMorgan’s JLTXX—is industry positioning for this paradigm shift.

The true protagonists in this direction are the tokenized money market fund providers sitting at the base of the value chain. Visa and Mastercard do not directly face consumers, but by charging approximately 0.1–0.3% in network fees per transaction, they have built high-margin, high-growth, deep-moat business models—with a combined market capitalization of more than $1tn, far surpassing the vast majority of card issuers.

Tokenized reserve asset providers—BlackRock, JPMorgan, and Morgan Stanley—are playing the same role in the crypto-dollar economy.

What we are witnessing is a regulation-driven changing of the guard at the financial infrastructure layer. The CLARITY Act closes the “indirect interest payment” pathways of the GENIUS era, but it has not closed yield itself—yield has been forcibly relocated to the reserve asset layer. The new world’s Visa and Mastercard are already in position.

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About BlockBooster：

BlockBooster is a next-era alternative asset management firm for the digital age. The firm leverages blockchain technology to invest in, incubate, and manage the core assets of this new era, from Web3-native projects to real-world assets (RWA). As value co-creators, BlockBooster is dedicated to unlocking the long-term potential of these assets, capturing exceptional value for its partners and investors in the digital economy.

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