A newly released report from the White House challenges claims made by the banking industry 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, discovered that banning stablecoin rewards would have a negligible impact 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 economists behind the report argue that a yield prohibition would do little to protect bank lending, while depriving consumers of competitive returns on stablecoin holdings.
The report marks the latest development in the ongoing conflict between US banks and the cryptocurrency industry, which has stalled digital asset legislation in Congress. The findings could undermine a key argument made by banking groups, which claim that a full ban on stablecoin yield would increase lending. However, the report claims that such a 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 banks use to make loans. Nevertheless, the White House economists argue that the bankers' argument misunderstands how stablecoins interact with the broader financial system.
The report also addresses concerns that community banks could lose out as funds flow into Treasuries and large institutions, finding the impact on smaller lenders is limited. The economists estimate that community banks would account for just 24% of any incremental lending under a yield ban, or about $500 million. The report suggests 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. The result is a multi-step dampening effect, where tens of billions of dollars may move between stablecoins and deposits, but only a fraction ultimately translates into new loans. 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.