A recent report released by the White House challenges the banking industry's claims that stablecoin yields would lead to a decline in deposits and weaken lending to households and small businesses. Instead, the analysis found that banning stablecoin rewards would have a negligible impact on credit creation. The report, which examines the GENIUS Act and potential updates to the Digital Asset Market Clarity Act, warns that restricting 'yield-like' rewards from intermediaries could be counterproductive.
The findings are based on an economic model using Federal Reserve and FDIC data, as well as industry disclosures and academic estimates. The report emphasizes that a yield prohibition would do little to protect bank lending, while depriving consumers of competitive returns on stablecoin holdings. The White House economists argue that the conditions for a positive effect from prohibiting yield are implausible.
The report marks the latest development in the ongoing conflict between U.S. banks and the cryptocurrency industry, which has stalled digital asset legislation in Congress.
While crypto firms argue that they should be allowed to offer yield-like rewards on stablecoins, banks warn that this would lead to funds being siphoned away from the traditional financial system. However, the report claims that even a full ban on stablecoin yield would increase lending only marginally.
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. The White House economists counter that the bankers' argument misunderstands how stablecoins interact with the broader financial system.
The report describes how funds used to buy 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 lose out as funds flow into Treasuries and large institutions, finding the impact on smaller lenders is limited. It estimates community banks would account for just 24% of any incremental lending under a yield ban, or about $500 million. The report explains 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. Rather than 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 even if individual banks see outflows.
Only a small share of stablecoin reserves, estimated at about 12%, is held in forms that could meaningfully restrict lending. Even then, the effect is heavily diluted by bank reserve requirements and liquidity buffers, which absorb much of the potential impact before it reaches borrowers.
The result is a multi-step dampening effect: 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 very institutions it is often framed as protecting.
The report said generating large lending effects requires hypothetically stacking several extreme conditions at once: a stablecoin market many times larger than today's, reserves fully locked away from lending, and a shift in Federal Reserve policy away from its current ample-reserves framework. Absent those scenarios, the impact remains marginal.
The report also reinforced the crypto industry's arguments in consumer terms. By eliminating yield, policymakers would effectively 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 suggested 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.
So far, according to the administration's own economists, that case remains unproven.