A newly released White House report directly challenges the banking industry's assertions that stablecoin yields would lead to a decline in deposits and lending to households and small businesses. Instead, the analysis by the Council of Economic Advisers found that prohibiting stablecoin rewards would have only a minimal effect on credit creation.
The report, which examines the GENIUS Act and proposed updates to the Digital Asset Market Clarity Act, warns that restricting 'yield-like' rewards from intermediaries could be counterproductive. The study's 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 also 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 claim that this would lead to funds being diverted away from the traditional financial system. However, the report's findings suggest that even a full ban on stablecoin yield would only marginally increase lending.
The American Bankers Association argues 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 available for loans. The report challenges this argument, stating that the prohibition would do little to protect lending while stripping consumers of competitive returns. The study also addresses concerns that community banks could lose out as funds flow into Treasuries and large institutions, finding that the impact on smaller lenders is limited. The report estimates that community banks would account for just 24% of any incremental lending under a yield ban, or about $500 million.
The White House economists behind the report contend that the policy delivers minimal benefits to the institutions it is intended to protect. The report also reinforces the crypto industry's arguments in consumer terms, stating that eliminating yield would 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.