The US crypto industry's key legislative push, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields, which bankers argue pose a significant threat to bank deposits. In response to a White House report downplaying the risks, the American Bankers Association asserts that the economists' analysis is flawed, as it considers the wrong scenario.
The ABA economists argue that the real concern is what would happen if stablecoin yields were allowed to continue, rather than the hypothetical scenario of a ban. According to the ABA, 'The CEA paper minimizes the core risk by starting from the wrong question. There is already ample evidence and analysis showing that a prohibition on yield for payment stablecoins is a prudent safeguard.' This debate has effectively derailed the Senate legislation for months, with lawmakers from both parties expressing concerns that depositors may abandon traditional banks for higher-yielding stablecoins. A compromise was proposed to ban yield on stablecoin holdings that resemble deposit accounts and only permit rewards programs for activity, but the banking sector remains unsatisfied.
As the debate continues, the chances of the Clarity Act passing the Senate process and reaching a floor vote become increasingly slim. The bankers warn that without intervention, the stablecoin market could rapidly expand from $300 million to $2 trillion, with yield becoming a key driver of migration out of bank deposits. Furthermore, they argue that even if leading stablecoin issuers were to deposit reserves in banks, these would likely go to larger institutions, leaving community banks vulnerable.