The US crypto industry's primary legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers have intensified their claims that the crypto industry's reward programs endanger bank deposits, despite a recent White House report downplaying these concerns. The American Bankers Association asserts that the White House economists' analysis is flawed, as it focuses on the wrong scenario.
Instead of examining the consequences of banning stablecoin yields, the economists should have considered the implications of allowing such returns. The ABA economists argue that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits.
This dispute has hindered the progress of the Clarity Act, which aims to regulate US crypto markets. The conflict has been ongoing, with senators from both parties previously swayed by bankers' arguments that depositors would abandon traditional banks for higher-yielding stablecoins. A compromise was proposed to ban yield on stablecoin holdings resembling deposit accounts, but the banking industry remains unsatisfied.
As the debate prolongs, the likelihood of the Clarity Act passing the Senate diminishes. The bankers warn that inaction on stablecoin yields could lead to rapid market growth, accelerating the migration of funds from bank deposits to stablecoins, and ultimately threatening the stability of the banking system.