A recent report released by the White House has directly challenged claims made by the banking industry that stablecoin yields would lead to a decline in deposits and lending to households and small businesses. The report, which was compiled by the Council of Economic Advisers, found that banning stablecoin rewards would have a negligible impact on credit creation.
The White House economists behind the report based their findings on an economic model that utilized data from the Federal Reserve and the FDIC, as well as industry disclosures and academic estimates. The report specifically analyzed the GENIUS Act and warned that proposed updates to the Digital Asset Market Clarity Act could be counterproductive.
It emphasized that prohibiting yield would do little to protect bank lending, while also depriving consumers of the benefits of competitive returns on stablecoin holdings. The report marks a significant development in the ongoing conflict between the US banking industry and the cryptocurrency sector, which has stalled digital asset legislation in Congress. The findings of the report could potentially undercut a core argument made by banking groups, which claim that a ban on stablecoin yields would lead to an increase in lending. However, the report claimed that such a ban would do little to protect lending, while also 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 their money out of banks and into digital dollars, reducing the funds available for loans. Nevertheless, the White House economists stated that this argument misunderstands the interaction between stablecoins and the broader financial system. They pointed out that funds used to purchase stablecoins are often reinvested in Treasury bills and ultimately redeposited into other banks, leaving overall deposit levels largely unchanged.
The report also addressed concerns that community banks could lose out as funds flow into Treasuries and large institutions, finding that the impact on smaller lenders is limited. It estimated that community banks would account for just 24% of any incremental lending under a yield ban, which translates to around $500 million. The report explained that the answer lies not in the level of deposits, but in their composition. Under the current 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 experience outflows. 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. This dynamic also weakens the argument that stablecoin yields pose a particular threat to community banks.
According to the report, smaller lenders would see just $500 million in additional lending under a yield ban, an increase of roughly 0.026%. The White House economists contended that the policy delivers minimal benefits to the very institutions it is often framed as protecting. The report said that generating large lending effects requires hypothetically stacking several extreme conditions at once, including a stablecoin market many times larger than today's, reserves fully locked away from lending, and a shift in Federal Reserve policy away from its current ample-reserves framework.
Absent those scenarios, the impact remains marginal. The report also reinforced the crypto industry's arguments in consumer terms, stating that eliminating yield would effectively reduce returns on a growing category of dollar-based assets that compete with traditional deposits.
The economists estimated that such a prohibition would carry a net welfare cost, as users give up yield without receiving meaningful improvements in credit availability in return. Rather than assuming stablecoin yields are destabilizing, the report suggested that policymakers must demonstrate that restricting them would deliver tangible benefits to the real economy, particularly to small businesses and households that rely on bank lending. So far, according to the administration's own economists, that case remains unproven.