The US crypto industry's main legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yield. Bankers argue that the White House economists' report, which downplayed the risks of stablecoin yield, was based on a flawed premise.
The American Bankers Association claims that the report should have examined the potential consequences of allowing stablecoin yield, rather than assuming a ban on it. The ABA economists argue that prohibiting yield on payment stablecoins is essential to prevent them from becoming a risky substitute for insured bank deposits.
This debate has been ongoing and has hindered the progress of the Clarity Act. Senators from both parties have been influenced by the bankers' concerns that depositors may switch to stablecoins for higher yields, leading to a compromise that would ban yield on stablecoin holdings resembling deposit accounts. However, the banks remain unsatisfied with this proposal. The longer the debate continues, the more challenging it will be to pass the Clarity Act.
The bankers warn that without intervention, the stablecoin market could rapidly expand, leading to a significant migration of funds out of bank deposits, particularly from community banks.