A recent White House report challenges claims made by the banking industry that stablecoin yields would lead to a reduction in deposits and a subsequent decrease in lending to small businesses and households. 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 signed in July 2025, also cautions against proposed updates to the Digital Asset Market Clarity Act that could further restrict yield-like rewards from intermediaries such as Coinbase, deeming them counterproductive. According to the report, a yield prohibition would offer little protection to bank lending while denying consumers the benefits of competitive returns on stablecoin holdings.
The findings are based on a stylized economic model that utilizes data from the Federal Reserve and the FDIC, as well as industry disclosures on stablecoin reserves and academic estimates of consumer behavior in shifting funds between assets. The report marks the latest development in the ongoing conflict between the US banking sector and the cryptocurrency industry, which has hindered digital asset legislation in Congress. The crypto industry and its legislative supporters argue that yield-like rewards on stablecoins should be permitted, while banks warn that this would lead to a diversion of funds from the traditional financial system.
However, the report suggests that even a complete ban on stablecoin yields would only marginally increase lending. The American Bankers Association insists that if stablecoins offer yields comparable to those of high-yield savings accounts, depositors will transfer money from banks to digital dollars, reducing the funds available for loans. Nevertheless, the White House economists contend that this argument misunderstands the interaction between stablecoins and the broader financial system. The report explains that funds used to purchase stablecoins are often reinvested in Treasury bills and ultimately redeposited into other banks, leaving overall deposit levels largely unchanged.
The report also addresses concerns that community banks could be adversely affected, finding that the impact on smaller lenders is limited. It estimates that community banks would account for only 24% of any incremental lending under a yield ban, equivalent to approximately $500 million.
The report 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 economists argue that the answer lies not in the level of deposits but in their composition, and that the current ample reserves regime allows for shifts between banks without forcing lenders to shrink their balance sheets. Instead of disappearing from the banking sector, much of the money backing stablecoins is recycled through it. When issuers invest reserves in Treasury bills or similar instruments, those funds typically end up redeposited elsewhere in the banking system, preserving overall deposit levels.
The report concludes that only a small share of stablecoin reserves, estimated at about 12%, is held in forms that could significantly restrict lending, and even then, the effect is heavily diluted by bank reserve requirements and liquidity buffers. 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. This dynamic also weakens the argument that stablecoin yields pose a particular threat to community banks.
According to the report, smaller lenders would see just $500 million in additional lending under a yield ban, an increase of roughly 0.026%. The White House economists contend that the policy delivers minimal benefits to the institutions it is intended to protect. 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. Rather than assuming stablecoin yields are destabilizing, the report suggests policymakers must demonstrate that restricting them would deliver tangible benefits to the real economy, particularly to small businesses and households that rely on bank lending.