The US crypto industry's legislative push, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yield. Bankers have reignited the debate, claiming that stablecoin reward programs endanger bank deposits. In response to a White House report downplaying the risks, the American Bankers Association asserts that the analysis is flawed, focusing on the wrong scenario.
The ABA argues that allowing stablecoin returns could lead to a massive migration of funds out of traditional bank deposits, ultimately threatening the stability of the banking system. This concern has been a major sticking point, with senators from both parties previously swayed by bankers' arguments that depositors would abandon banks for higher-yielding stablecoins.
A proposed compromise to ban yield on stablecoin holdings resembling deposit accounts and permit rewards programs for activity has not alleviated bankers' concerns. As the debate drags on, the likelihood of the Clarity Act passing diminishes.
The bankers warn that inaction on stablecoin yield could enable the stablecoin market to rapidly expand from $300 million to $2 trillion, with yield becoming a key driver of growth and accelerating the migration of funds out of bank deposits.