A report released by the White House on Wednesday directly challenges claims made by the banking industry that stablecoin yields would lead to a decline in deposits and weaken lending to households and small businesses. Instead, the analysis found that banning these rewards would have a negligible impact on credit creation. The report, which examines the GENIUS Act signed in July 2025, also cautions that proposed updates to the Digital Asset Market Clarity Act could be counterproductive. The White House economists behind the report argue that their findings are based on an economic model that utilizes data from the Federal Reserve and FDIC, as well as industry disclosures on stablecoin reserves.
The report emphasizes that a yield prohibition would do little to protect bank lending while stripping consumers of competitive returns on stablecoin holdings. This marks the latest development in the ongoing conflict between the US banking sector and the cryptocurrency industry, which has stalled digital asset legislation in Congress. The crypto industry argues that yield-like rewards on stablecoins should be permitted, while banks warn that this would lead to a decline in traditional financial system funding.
However, the report's findings suggest that even a full ban on stablecoin yields would only marginally increase lending. The American Bankers Association insists that stablecoins offering yields comparable to high-yield savings accounts would lead to depositors moving money out of banks and into digital dollars, reducing the funds available for loans. Nevertheless, the White House economists contend that this argument misunderstands how stablecoins interact with the broader financial system, citing examples where funds used to buy stablecoins are reinvested in Treasury bills and ultimately redeposited into other banks, leaving overall deposit levels largely unchanged.
The report also addresses concerns that community banks could lose out as funds flow into Treasuries and large institutions, finding the impact on smaller lenders to be limited. It estimates that community banks would account for just 24% of any incremental lending under a yield ban, or approximately $500 million. The economists explain that the answer lies not in the level of deposits, but in their composition, and that under the current ample reserves regime, shifts between banks do not force lenders to shrink their balance sheets.
Instead, much of the money backing stablecoins is recycled through the banking system, preserving overall deposit levels even if individual banks see outflows. The report concludes that only a small share of stablecoin reserves, estimated at about 12%, is held in forms that could restrict lending, and even then, the effect is heavily diluted by bank reserve requirements and liquidity buffers. As a result, the White House economists argue that the policy delivers minimal benefits to the institutions it is intended to protect, and that generating large lending effects would require extreme conditions, including a significantly larger stablecoin market and a shift in Federal Reserve policy. The report also reinforces the crypto industry's arguments in consumer terms, suggesting that eliminating yield would reduce returns on a growing category of dollar-based assets that compete with traditional deposits, and that such a prohibition would carry a net welfare cost for users.