A recent report released by the White House challenges the banking industry's assertion that stablecoin yields would lead to a decline in deposits and weaken lending to small businesses and households. The analysis, conducted by the Council of Economic Advisers, found that banning stablecoin rewards would have a negligible impact on credit creation. The report, which examines the GENIUS Act and proposed updates to the Digital Asset Market Clarity Act, warns that restricting yield-like rewards from intermediaries could be counterproductive.
The findings suggest that prohibiting yields 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 U.S. banks and the cryptocurrency industry, which has stalled digital asset legislation in Congress.
The White House economists argue that the conditions for a positive welfare effect from prohibiting yield are implausible, and that the prohibition would do little to protect lending while stripping consumers of competitive returns. The report claims that the banking industry's argument misunderstands how stablecoins interact with the broader financial system, and that the real-world effect on smaller banks may be even smaller.
The economists estimate that community banks would account for just 24% of any incremental lending under a yield ban, and that stablecoin activity is already concentrated among large financial institutions. The report concludes that the answer lies not in the level of deposits, but in their composition, and that the money backing stablecoins is recycled through the banking system, preserving overall deposit levels.
The result is a multi-step dampening effect, where only a fraction of the funds ultimately translates into new loans. The report weakens the argument that stablecoin yields pose a particular threat to community banks, and contends that the policy delivers minimal benefits to the very institutions it is often framed as protecting. The economists argue that generating large lending effects requires hypothetically stacking several extreme conditions at once, and that absent those scenarios, the impact remains marginal. The report also reinforces the crypto industry's arguments in consumer terms, stating 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.