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 reignited the debate, warning that the industry's reward programs pose a risk to bank deposits.
In response to a White House report downplaying the threat of stablecoins to traditional banking, the American Bankers Association argues that the economists misframed the issue. Instead of examining the effects of banning stablecoin yields, they should have considered the consequences of allowing such yields to continue. The ABA economists claim that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits.
This dispute has derailed Senate legislation for months, with lawmakers attempting to find a compromise that addresses the bankers' concerns. The proposed Clarity Act aims to regulate US crypto markets, but its progress has been hindered by the stablecoin yield debate. Senator Cynthia Lummis, chair of the Banking Committee's digital assets subcommittee, has urged action on the bill, emphasizing the need for clarity in the crypto space.
The longer the debate prolongs, the more challenging it will be to pass the bill. Bank representatives have argued that failing to intervene in stablecoin yields could lead to a rapid scaling of stablecoin markets, accelerating the migration of funds out of bank deposits. The American Bankers Association warns that this could have significant consequences for the banking sector, particularly community banks.