The US crypto industry's efforts to pass the Digital Asset Market Clarity Act have been hindered by a contentious issue surrounding stablecoin yield. Bankers have been vocal about their concerns that stablecoin reward programs pose a threat to bank deposits, contradicting a recent report by White House economists that downplayed this risk. The American Bankers Association argues that the White House economists' analysis was flawed, as it focused on the wrong scenario and failed to consider the potential consequences of allowing stablecoin yields to continue.
The ABA economists claim that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits. This debate has stalled the progress of the Clarity Act, which aims to regulate the US crypto market.
Despite a proposed compromise that would ban yield on stablecoin holdings resembling deposit accounts, bankers remain unconvinced. The longer the debate continues, the more challenging it will be to pass the Clarity Act. The bankers warn that if left unchecked, stablecoin markets could rapidly expand, leading to a significant migration of funds out of bank deposits and into stablecoins, ultimately threatening the stability of the banking system.