The US crypto industry's primary legislative effort, the Digital Asset Market Clarity Act, has been stalled due to disagreements over stablecoin yields. Bankers have argued that these yields pose a threat to bank deposits, contradicting a recent report by White House economists. The American Bankers Association claims that the White House analysis is flawed, as it focuses on the wrong scenario.
Instead of examining the effects of banning stablecoin yields, the White House should consider the consequences of allowing these yields to continue. The bankers argue that permitting stablecoin yields would lead to a significant migration of funds out of bank deposits, ultimately threatening the stability of the banking system.
The conflict over stablecoin yields has delayed the Senate's consideration of the Clarity Act, which aims to regulate the US crypto market. While lawmakers have proposed a compromise that would ban yields on stablecoin holdings that resemble deposit accounts, the banking industry remains unsatisfied.
The longer the debate continues, the more challenging it will be to pass the Clarity Act. The bankers' latest argument suggests that the absence of regulatory intervention would allow stablecoin markets to grow rapidly, from $300 million to $2 trillion, and that yield would become a key driver of this growth, accelerating the migration of funds out of bank deposits.