A recent report from the White House challenges the banking industry's claim that yields on stablecoins would lead to a decline in deposits and lending to small businesses and households. The analysis, conducted by the Council of Economic Advisers, found that banning these rewards would have a negligible impact on credit creation.
The report, which examines the GENIUS Act and proposed updates to the Digital Asset Market Clarity Act, warns that restrictions on "yield-like" rewards could be counterproductive. According to the report, a yield prohibition would do little to protect bank lending, while depriving consumers of competitive returns on stablecoin holdings.
The study 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 findings could undermine a key argument made by banking groups, as they suggest that even a complete ban on stablecoin yields would only marginally increase lending. The report claims that the prohibition would do little to protect lending, while stripping consumers of competitive returns. The American Bankers Association argues that if stablecoins offer yields comparable to high-yield savings accounts, depositors will move money out of banks and into digital dollars, reducing the funds available for loans.
However, the White House economists argue that this perspective 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, approximately $500 million. It also notes that stablecoin activity is already concentrated among large financial institutions, suggesting that the real-world effect on smaller banks may be even smaller.
The report concludes that the answer lies not in the level of deposits, but in their composition. 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. 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 reinforces the crypto industry's arguments, suggesting that eliminating yield would reduce returns on a growing category of dollar-based assets that compete with traditional deposits, resulting in a net welfare cost for consumers.