The US crypto industry's key legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. 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 argues that economists analyzed the wrong scenario, focusing on the consequences of banning stablecoin yields rather than allowing them. ABA economists believe that permitting stablecoin yields would lead to a risky substitute for insured bank deposits, undermining the banking system.
This dispute has derailed Senate legislation for months, with lawmakers attempting to find a compromise. The bankers' arguments have swayed senators, who are concerned that depositors will abandon traditional banks for higher-yielding stablecoins.
The proposed compromise would ban yield on stablecoin holdings resembling deposit accounts, only allowing rewards programs for activities like credit-card rewards. However, the banking industry remains unsatisfied. As the debate prolongs, the likelihood of passing the Clarity Act diminishes. The bankers warn that inaction on stablecoin yields would enable rapid market growth, accelerating the migration of funds out of bank deposits.
They contend that leading stablecoin issuers would deposit reserves in larger banks, bypassing community banks.