The US crypto industry's efforts to pass the Digital Asset Market Clarity Act have been hindered by a dispute over stablecoin yields, which bankers claim poses a threat to bank deposits. In response to a White House report downplaying the risks, the American Bankers Association argues that the administration's economists are analyzing the situation from the wrong perspective. Instead of considering the impact of a ban on stablecoin yields, they should be looking at the potential consequences of allowing such yields to continue.
The bankers contend 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 legislation for months, with lawmakers attempting to find a compromise that would ban yield on stablecoin holdings that resemble deposit accounts. However, the banking industry remains unsatisfied, warning that the absence of intervention could lead to a rapid scaling of stablecoin markets, resulting in a migration of funds out of bank deposits.
The American Bankers Association suggests that the lack of regulation would allow stablecoin markets to grow from $300 million to as much as $2 trillion, with yield becoming a key driver of this growth. The organization also notes that leading stablecoin issuers would likely deposit their reserves in larger banks, rather than community banks, further exacerbating the issue.