A report issued by the White House on Wednesday directly contradicts claims by the banking industry that stablecoin yields would lead to a decline in deposits and weaken lending to households and small businesses. Instead, the analysis found that banning these 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 could be counterproductive. It emphasizes that a yield prohibition would do little to protect bank lending, while denying consumers the benefits of competitive returns on stablecoin holdings.
The findings are based on an economic model using Federal Reserve and FDIC data, as well as industry disclosures and academic estimates. The report suggests that the conditions required for a yield prohibition to have a positive effect on welfare are implausible. This development is the latest in the ongoing conflict between the U.S.
banking industry and the cryptocurrency sector, which has stalled digital asset legislation in Congress. While crypto firms argue that they should be allowed to offer yield-like rewards, banks claim that this would lead to funds being diverted from the traditional financial system. However, the report's findings could undermine a key argument made by banking groups.
The economists behind the report claim that even a full ban on stablecoin yields would only marginally increase lending. The report also addresses concerns that community banks could be harmed, finding that the impact on smaller lenders would be limited.
It estimates that community banks would account for only 24% of any incremental lending under a yield ban, which would amount to approximately $500 million. The report explains that the answer lies not in the level of deposits, but in their composition, and that the 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.
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 concludes that the policy delivers minimal benefits to the institutions it is intended to protect. It also reinforces the crypto industry's arguments in consumer terms, suggesting that eliminating yield would reduce returns on dollar-based assets that compete with traditional deposits, resulting in a net welfare cost for users.