A recent report released by the White House challenges the banking industry's claims that stablecoin yields would lead to a depletion of deposits and a subsequent weakening of 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 that proposed restrictions on 'yield-like' rewards from intermediaries could be counterproductive. The findings are based on an economic model that utilizes data from the Federal Reserve, FDIC, and industry disclosures on stablecoin reserves, as well as academic estimates of consumer behavior.
The report emphasizes that a yield prohibition would do little to protect bank lending, while denying consumers the benefits of competitive returns on stablecoin holdings. The study suggests that the conditions necessary for a yield prohibition to have a positive impact on welfare are implausible. This report 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 crypto industry argues 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's findings could undermine the banking sector's argument, as even a full ban on stablecoin yields would only marginally increase lending. The American Bankers Association insists that stablecoins offering yields comparable to high-yield savings accounts would lead to depositors moving money out of banks and into digital dollars, reducing the funds available for loans.
Nevertheless, the White House economists argue that this perspective 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 study 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, approximately $500 million.
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.
Only a small share of stablecoin reserves is held in forms that could 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 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 emphasizes that generating large lending effects requires extreme conditions, including a significantly larger stablecoin market, reserves fully locked away from lending, and a shift in Federal Reserve policy.
Absent these scenarios, the impact remains marginal. The report also reinforces the crypto industry's arguments in consumer terms, suggesting 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. Rather than assuming stablecoin yields are destabilizing, the report suggests that 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.