The U.S. crypto industry's efforts to advance the Digital Asset Market Clarity Act have been hindered by a contentious issue surrounding stablecoin yield. Despite a recent report from White House economists downplaying the risks, the American Bankers Association argues that the rewards programs offered by stablecoins pose a significant threat to traditional bank deposits.
The ABA contends that the White House economists' analysis was flawed, as it focused on the wrong scenario and failed to consider the potential consequences of allowing stablecoin yield to continue unchecked. According to the ABA, the evidence suggests 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 legislation in the Senate for months, with lawmakers struggling to find a compromise that addresses the concerns of both the banking and crypto industries. The ABA's economists warn that if stablecoin yield is allowed to continue, it could lead to a rapid scaling of the stablecoin market, potentially reaching $2 trillion, and accelerating the migration of funds out of traditional bank deposits.
This, in turn, could have severe consequences for community banks, which may not benefit from the influx of deposits from stablecoin issuers.