A recent White House study challenges the banking sector's claims that stablecoin yields threaten to deplete deposits and hinder lending to households and small businesses. The analysis, conducted by the Council of Economic Advisers, discovered that prohibiting stablecoin rewards would have a negligible impact on credit creation. The report, which examines the GENIUS Act, warns that proposed restrictions on 'yield-like' rewards from intermediaries could be counterproductive. The findings suggest that a yield prohibition would do little to protect bank lending, while denying consumers the benefits of competitive returns on stablecoin holdings.
The report marks the latest development in the ongoing conflict between the US banking industry and the cryptocurrency sector, which has stalled digital asset legislation in Congress. The crypto industry argues that yield-like rewards on stablecoins should be permitted, while banks claim this would lead to a loss of funds from the traditional financial system. However, the White House economists' findings indicate that even a complete ban on stablecoin yield would only marginally increase lending. The report also addresses concerns that community banks might be harmed, finding that the impact on smaller lenders would be limited, with community banks accounting for just 24% of any incremental lending under a yield ban.
The study concludes that the policy delivers minimal benefits to the institutions it aims to protect and that the costs of a yield prohibition would fall on consumers, who would give up yield without receiving meaningful improvements in credit availability in return.