The US crypto industry's push for regulatory clarity, as outlined in the Digital Asset Market Clarity Act, has been hindered by disagreements over stablecoin yields and their potential impact on bank deposits. In response to a White House report downplaying the risks, the American Bankers Association argues that economists are focusing on the wrong scenario, and instead, should be considering the consequences of allowing stablecoin yields to continue.
The ABA economists believe that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits. This debate has stalled the Senate legislation, with lawmakers attempting to find a compromise that would ban yield on stablecoin holdings resembling deposit accounts and only permit rewards programs for activity.
However, the banking industry remains concerned that the absence of intervention would lead to a rapid scaling of stablecoin markets, potentially accelerating the migration of funds out of bank deposits. The ABA warns that this could have significant consequences, particularly for community banks, as leading stablecoin issuers are likely to deposit their reserves in larger institutions.