A recent report from the White House challenges the banking industry's claims that stablecoin yields would lead to a decline in deposits and lending to households and small businesses. The report, released by the Council of Economic Advisers, suggests that banning stablecoin rewards would have a negligible impact on credit creation. The study is based on an economic model that uses data from the Federal Reserve and the FDIC, as well as industry disclosures on stablecoin reserves.
The findings indicate that proposed updates to the Digital Asset Market Clarity Act, which aim to restrict yield-like rewards from intermediaries, could be counterproductive. The report states that a yield prohibition would do little to protect bank lending, while depriving consumers of competitive returns on stablecoin holdings. The study 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 report's findings could undercut a key argument made by banking groups, which claim that a ban on stablecoin yields would increase lending.
However, the White House economists argue that the prohibition would do little to protect lending, while stripping consumers of competitive returns. The American Bankers Association has argued 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 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 argue 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. The report concludes that only a small share of stablecoin reserves is held in forms that could meaningfully restrict lending, and even then, the effect is heavily diluted by bank reserve requirements and liquidity buffers. 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 estimate that such a prohibition would carry a net welfare cost, as users give up yield without receiving meaningful improvements in credit availability in return.