A recent White House report challenges the banking industry's assertion that stablecoin yields would lead to a decline in deposits and lending to households and small businesses. The report, released by the Council of Economic Advisers, found that banning stablecoin rewards would have a negligible impact on credit creation. The study, which analyzed the GENIUS Act and proposed updates to the Digital Asset Market Clarity Act, warns that further restrictions on yield-like rewards could be counterproductive.
The White House economists argue that a yield prohibition would do little to protect bank lending, while depriving consumers of competitive returns on stablecoin holdings. The report marks the latest development in the ongoing conflict between U.S.
banks and the cryptocurrency industry, which has stalled digital asset legislation in Congress. The findings could undercut a core argument from banking groups, which claim that a ban on stablecoin yield would increase lending. However, the report claims that such a ban would have a minimal impact on lending, while stripping consumers of competitive returns.
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 the bankers' argument misunderstands how stablecoins interact with the broader financial system. The report also addresses concerns that community banks could lose out as funds flow into Treasuries and large institutions, finding that the impact on smaller lenders is limited.
The economists estimate that community banks would account for just 24% of any incremental lending under a yield ban, which translates to approximately $500 million. 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 even if individual banks see outflows. 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, stating that eliminating yield would reduce returns on a growing category of dollar-based assets that compete with traditional deposits. The economists estimated that such a prohibition would carry a net welfare cost, as users give up yield without receiving meaningful improvements in credit availability in return.