A recent report from the White House challenges the banking industry's claims that stablecoin yields would lead to a decline in deposits and a subsequent weakening of lending to households and small businesses. The analysis, conducted by the Council of Economic Advisers, found that banning stablecoin rewards would have a negligible impact on credit creation. The report, which examines the GENIUS Act signed in July 2025, also cautions that proposed updates to the Digital Asset Market Clarity Act could have counterproductive effects.
The economists argue that a yield prohibition would do little to protect bank lending, while depriving consumers of competitive returns on stablecoin holdings. The report is the latest development in the ongoing conflict between the US banking sector and the cryptocurrency industry, which has stalled digital asset legislation in Congress.
The crypto industry and its supporters argue that they should be allowed to offer yield-like rewards on stablecoins, while banks warn 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 yields would only marginally increase lending. The American Bankers Association insists 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.
Nevertheless, the White House economists contend that this argument misunderstands how stablecoins interact with the broader financial system. The report estimates that community banks would account for just 24% of any incremental lending under a yield ban, or approximately $500 million, and notes that stablecoin activity is already concentrated among large financial institutions. The economists argue 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. Instead, much of the money backing stablecoins is recycled through the banking system, preserving overall deposit levels even if individual banks experience outflows.
The report concludes that the policy of prohibiting stablecoin yields delivers minimal benefits to the institutions it is intended to protect, and that the costs fall on consumers, who would be deprived of competitive returns on a growing category of dollar-based assets.