A recent White House study directly challenges the banking industry's claims that stablecoin yields would lead to a decline in deposits and lending to households and small businesses, instead finding that banning these rewards would have a negligible impact on credit creation. The 21-page report, released by the Council of Economic Advisers, is based on a stylized economic model using Federal Reserve and FDIC data, as well as industry disclosures and academic estimates. The study specifically analyzes the GENIUS Act and warns that proposed updates to the Digital Asset Market Clarity Act could be counterproductive. The report's findings suggest that a yield prohibition would do little to protect bank lending, while depriving consumers of competitive returns on stablecoin holdings.
This marks the latest development in the ongoing conflict between U.S. banks and the cryptocurrency industry, which has stalled digital asset legislation in Congress.
The crypto industry argues that they should be allowed to offer yield-like rewards on stablecoins, while 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, and that the prohibition would do little to protect lending while stripping consumers of competitive returns. 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 argue that the bankers' argument misunderstands how stablecoins interact with the broader financial system.
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. The study 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 report concludes 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. Rather than disappearing from the banking sector, much of the money is recycled through it, and only a small share of stablecoin reserves is held in forms that could restrict lending.
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. The report also reinforces the crypto industry's arguments in consumer terms, suggesting that policymakers must demonstrate that restricting stablecoin yields would deliver tangible benefits to the real economy, particularly to small businesses and households that rely on bank lending.