The US crypto industry's push for regulatory clarity, embodied in the Digital Asset Market Clarity Act, has been stalled due to disagreements over stablecoin yields. Bankers have expressed concerns that these yields could lure depositors away from traditional banks, despite a recent White House report downplaying such risks.
The American Bankers Association asserts that the White House economists' analysis is flawed, as it fails to consider the potential consequences of allowing stablecoin yields to continue unchecked. The ABA argues that banning stablecoin yields would be a prudent measure to safeguard the banking system and prevent stablecoins from becoming a risky alternative to insured deposits. This debate has stalled the Senate legislation, with lawmakers attempting to find a compromise that would restrict yields on stablecoin holdings resembling deposit accounts while permitting rewards programs for certain activities. However, the banking industry remains unsatisfied, warning that inaction on stablecoin yields could lead to a rapid scaling of stablecoin markets, potentially accelerating the migration of funds out of traditional bank deposits.
The ABA suggests that the absence of intervention could result in stablecoin markets growing from $300 million to as much as $2 trillion, with yield becoming a key driver of this growth. Furthermore, the association notes that even if stablecoin issuers were to deposit their reserves in banks, these deposits would likely go to larger institutions, bypassing community banks.