A recent report released by the White House challenges the banking industry's claim that stablecoin yields would lead to a decline in deposits and lending to households and small businesses. The analysis, conducted by the Council of Economic Advisers, found that banning stablecoin rewards would have a minimal effect on credit creation.
The report, which examined 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 suggests that prohibiting yield would do little to protect bank lending, while depriving consumers of competitive returns on stablecoin holdings.
The findings are based on a stylized economic model that incorporates data from the Federal Reserve and the FDIC, as well as industry disclosures and academic estimates. The report marks 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 argues that it 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 White House economists contend that even a full ban on stablecoin yield would increase lending only marginally.
The report claims that the prohibition would do little to protect lending, while stripping consumers of competitive returns. 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 lending. Nevertheless, the White House economists argue that the bankers' argument misunderstands how stablecoins interact with the broader financial system. The report suggests that funds used to buy stablecoins are often reinvested in Treasury bills and ultimately redeposited into other banks, leaving overall deposit levels largely unchanged.
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 approximately $500 million. The White House economists conclude that the answer lies not in the level of deposits, but in their composition.
Under the current 'ample reserves' regime, 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. Only a small share of stablecoin reserves, estimated at around 12%, is held in forms that could meaningfully restrict lending.
The report also reinforces the crypto industry's arguments in consumer terms, suggesting 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.