A report released by the White House on Wednesday challenges claims 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 study, which examined the GENIUS Act signed in July 2025, also warns that proposed updates to the Digital Asset Market Clarity Act could be counterproductive if they further restrict 'yield-like' rewards from intermediaries like Coinbase.
According to the report, a yield prohibition would do little to protect bank lending and would deprive consumers of competitive returns on stablecoin holdings. The findings are based on a stylized economic model that uses data from the Federal Reserve, the FDIC, and industry disclosures on stablecoin reserves, as well as academic estimates of consumer behavior. The report emphasizes that 'the conditions for finding a positive welfare effect from prohibiting yield are simply implausible.' This latest development comes as the conflict between U.S.
banks and the cryptocurrency industry continues to stall digital asset legislation in Congress. The crypto industry argues that yield-like rewards on stablecoins should be allowed, while banks claim that this would lead to a loss of funds from the traditional financial system. However, the White House report suggests that even a full ban on stablecoin yield would only marginally increase lending.
The American Bankers Association has argued that if stablecoins offer yields comparable to high-yield savings accounts, depositors will move their money out of banks and into digital dollars, reducing the funds available for loans. But the White House economists counter that this argument misunderstands how stablecoins interact with the broader financial system. They point out 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 report 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.
It estimates that community banks would account for just 24% of any incremental lending under a yield ban, or about $500 million. The report concludes 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 see outflows.
Only a small share of stablecoin reserves, estimated at about 12%, is held in forms that could meaningfully restrict lending. 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.