The US crypto industry's efforts to pass the Digital Asset Market Clarity Act have been hindered by a contentious issue surrounding stablecoin yields, which bankers argue could jeopardize bank deposits. In response to a White House economists' report downplaying the risks, the American Bankers Association has countered that the analysis is based on the wrong scenario. Instead of examining the consequences of banning stablecoin yields, the ABA argues that the focus should be on the potential risks if such yields are permitted. The ABA economists stated, 'The CEA paper minimizes the core risk by starting from the wrong question.' They believe that prohibiting yield for 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, with lawmakers attempting to find a compromise that addresses the bankers' concerns. The proposed compromise would ban yield on stablecoin holdings that resemble deposit accounts, only allowing rewards programs for activity, similar to credit-card rewards. However, the bankers have not endorsed this solution. The longer the debate continues, the more challenging it will be to pass the Clarity Act.
The bankers' latest arguments warn that failing to intervene in stablecoin yields could lead to a rapid expansion of the stablecoin market, potentially accelerating the migration of funds out of bank deposits. According to the ABA, leading stablecoin issuers would likely deposit their reserves in larger banks, rather than community banks, further exacerbating the issue.