The US crypto industry's primary legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers have intensified their claims that the crypto industry's reward programs pose a threat to bank deposits, contradicting a recent White House report that downplayed these concerns.
The American Bankers Association asserts that the White House economists analyzed the wrong scenario, focusing on the consequences of banning stablecoin yields rather than the potential risks of allowing them. The ABA economists argue 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 hindered the progress of the Clarity Act, with lawmakers struggling to find a compromise between the banking and crypto industries. The conflict centers on the potential for stablecoin yields to lure depositors away from traditional banks, with bankers warning that this could lead to a significant migration of funds out of bank deposits and into stablecoin markets.
The longer the debate continues, the more challenging it will be to pass the Clarity Act, which aims to regulate the US crypto market. The bankers' latest arguments suggest that failing to intervene in stablecoin yields could allow the market to grow rapidly, potentially reaching $2 trillion, and accelerate the migration of deposits out of traditional banks.