The US crypto industry's key legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yield. Bankers have voiced concerns that stablecoin reward programs pose a threat to bank deposits, contradicting a recent White House economists' report. The American Bankers Association argues that the White House analysis is flawed, as it focuses on the impact of banning stablecoin yield rather than allowing it. The ABA contends that permitting stablecoin returns would lead to a significant migration of funds out of bank deposits, ultimately threatening the stability of the banking system.
This debate has hindered the progress of the Clarity Act, which aims to regulate the US crypto market. Lawmakers had proposed a compromise to ban yield on stablecoin holdings that resemble deposit accounts, but the banking industry remains unsatisfied.
The longer the debate continues, the more challenging it will be to pass the Clarity Act. The bankers warn that inaction on stablecoin yield could lead to rapid growth in stablecoin markets, from $300 million to $2 trillion, and accelerate the migration of funds out of bank deposits.