The US crypto industry's push for regulatory clarity has been hindered by a dispute over stablecoin yield, with bankers arguing it poses a threat to bank deposits. In a rebuttal to a White House report downplaying the risks, the American Bankers Association claims that economists are analyzing the issue from the wrong angle.
Instead of considering the effects of a ban on stablecoin yield, they should be looking at the potential consequences of allowing such returns. The ABA argues that prohibiting yield on payment stablecoins is a necessary safeguard to prevent them from becoming a risky substitute for insured bank deposits. This debate has stalled the progression of the Digital Asset Market Clarity Act, which aims to regulate US crypto markets. Lawmakers had proposed a compromise to ban yield on stablecoin holdings that resemble deposit accounts, but bankers remain unconvinced.
The longer the debate continues, the more challenging it will be to pass the legislation. Bankers warn that failing to intervene in stablecoin yield could lead to a rapid scaling of stablecoin markets, accelerating the migration of funds out of bank deposits.