A recent White House study challenges the banking industry's assertion 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, which examines the GENIUS Act and proposed updates to the Digital Asset Market Clarity Act, warns that restricting 'yield-like' rewards from intermediaries 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 conflict between US banks and the cryptocurrency industry, which has stalled digital asset legislation in Congress. The crypto industry and its legislative supporters argue that they should be allowed to offer yield-like rewards on stablecoins, while banks warn that this would lead to funds being diverted away from the traditional financial system.
However, the report's findings suggest that even a full ban on stablecoin yield would only marginally increase lending. The American Bankers Association insists that if stablecoins begin offering yields comparable to high-yield savings accounts, depositors will move money out of banks and into digital dollars, reducing the funds banks use to make loans.
Nevertheless, the White House economists contend that the bankers' argument misunderstands how stablecoins interact with the broader financial system. The report estimates that community banks would account for just 24% of any incremental lending under a yield ban, and notes that stablecoin activity is already concentrated among large financial institutions.
The economists argue that the answer lies not in the level of deposits, but in their composition, and that the money backing stablecoins is often reinvested in Treasury bills and ultimately redeposited into other banks, preserving overall deposit levels. The report concludes that the policy of prohibiting stablecoin yields would deliver minimal benefits to the institutions it is intended to protect, while imposing costs on consumers.