The US crypto industry's efforts to pass the Digital Asset Market Clarity Act have been hindered by a contentious issue surrounding stablecoin yields. Bankers have expressed concerns that these yields could lure depositors away from traditional banks, despite a recent report from White House economists downplaying the risks.
The American Bankers Association has countered that the White House's analysis is flawed, as it focuses on the wrong scenario. Instead of examining the effects of banning stablecoin yields, the ABA argues that policymakers should consider the consequences of allowing these yields to continue. The ABA's economists claim that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits. This debate has stalled the Senate's consideration of the Clarity Act, which aims to regulate the US crypto market.
Lawmakers had attempted to find a compromise by banning yield on stablecoin holdings that resemble deposit accounts, but the banking industry remains unsatisfied. As the debate drags on, the likelihood of the Clarity Act passing diminishes. The bankers warn that inaction on stablecoin yields could lead to a rapid expansion of the stablecoin market, potentially causing a mass exodus of depositors from traditional banks. The ABA argues that this would have severe consequences, particularly for community banks, which might not benefit from the influx of stablecoin reserves.