A recent report from the White House challenges the banking industry's claims that stablecoin yields would lead to a decline in deposits and lending to households and small businesses. The analysis, conducted by the Council of Economic Advisers, found that banning stablecoin rewards would have a negligible impact on credit creation.
The report's findings are based on an economic model that utilizes data from the Federal Reserve and the FDIC, as well as industry disclosures on stablecoin reserves. The study specifically examines the implications of the GENIUS Act and warns that proposed restrictions on 'yield-like' rewards could be counterproductive.
The economists behind the report argue that a yield prohibition would do little to protect bank lending, while denying consumers the benefits of competitive returns on stablecoin holdings. The report marks a significant development in the ongoing conflict between the US banking sector and the cryptocurrency industry, which has stalled digital asset legislation in Congress. The findings could undercut a core argument made by banking groups, which claim that stablecoin yields would lead to a significant decline in lending. The report suggests that even a full ban on stablecoin yields would only marginally increase lending.
The American Bankers Association has argued that if stablecoins begin offering yields comparable to high-yield savings accounts, depositors will move their money out of banks and into digital dollars, reducing the funds available for loans. However, the White House economists contend that this argument misunderstands how stablecoins interact with the broader financial system. The report estimates that community banks would account for only 24% of any incremental lending under a yield ban, which would amount to approximately $500 million. The economists argue that the impact on smaller lenders is limited, as stablecoin activity is already concentrated among large financial institutions.
The report concludes that the answer lies not in the level of deposits, but in their composition, and that the 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. The result is a multi-step dampening effect, where tens of billions of dollars may move between stablecoins and deposits, but only a fraction ultimately translates into new loans. 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.
The economists estimate that such a prohibition would carry a net welfare cost, as users give up yield without receiving meaningful improvements in credit availability in return.