The US crypto industry's main legislative push, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. The banking sector has expressed concerns that stablecoin reward programs pose a risk to bank deposits, contradicting a recent report from White House economists. The American Bankers Association argues that the White House's analysis is flawed, as it focuses on the wrong scenario. Instead of examining the effects of banning stablecoin yields, the ABA believes the White House should consider the consequences of allowing such yields.
The ABA's economists argue that prohibiting yields 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 for months, despite lawmaker predictions that it could be heard in the Senate Banking Committee by the end of the month.
The conflict centers around the potential for depositors to leave banks in favor of higher-yielding stablecoins, with senators from both parties previously moved by the bankers' arguments. A compromise was proposed, banning yields on stablecoin holdings that resemble deposit accounts and only allowing rewards programs for activity.
However, the banking industry has not endorsed this compromise. The longer the debate continues, the more challenging it will be to pass the Clarity Act through the Senate. The bankers' latest arguments suggest that failing to intervene in stablecoin yields could lead to rapid market growth, accelerating the migration of funds out of bank deposits.
According to the ABA, leading stablecoin issuers would likely deposit reserves in larger banks, rather than community banks.