The US crypto industry's key legislative proposal, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers are now pushing back against a White House report that downplayed the risks of stablecoins to traditional bank deposits.
The American Bankers Association claims that the White House economists analyzed the wrong scenario, focusing on the effects of banning stablecoin yields rather than the consequences of allowing them. The ABA argues that permitting stablecoin yields could lead to a significant migration of deposits out of traditional banks and into stablecoins, posing a risk to the banking system. This debate has been ongoing, with lawmakers attempting to find a compromise that would ban yield on stablecoin holdings that resemble deposit accounts and only permit rewards programs for activity.
However, the banking industry remains unconvinced, warning that the absence of intervention could allow stablecoin markets to rapidly expand, potentially reaching $2 trillion and accelerating the migration of deposits out of banks. The ABA suggests that even if leading stablecoin issuers were to deposit their reserves in banks, they would likely choose larger institutions over community banks.