The U.S. crypto industry's efforts to pass the Digital Asset Market Clarity Act have been hindered by disagreements over stablecoin yields, which bankers argue could lure depositors away from traditional banks.
In a rebuttal to a White House report downplaying these risks, the American Bankers Association asserts that economists have analyzed the situation from the wrong perspective, focusing on the effects of banning stablecoin yields rather than the consequences of allowing them. The ABA economists argue 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 Senate legislation, including the Guiding and Establishing National Innovation for U.S.
Stablecoins Act, with lawmakers struggling to find a compromise between the banking industry's concerns and the crypto industry's push for regulatory clarity. The conflict centers on the potential for stablecoin yields to outpace the interest rates offered by banks, prompting depositors to move their funds to stablecoins. While a proposed compromise would ban yield on stablecoin holdings resembling deposit accounts, allowing only rewards programs for activity, the banking industry remains unsatisfied.
As the debate prolongs, the likelihood of passing the Clarity Act diminishes, with crypto insiders and bank representatives weighing in on the issue. The bankers warn that without intervention, the stablecoin market could rapidly expand, with yield becoming a key driver of growth, potentially at the expense of traditional bank deposits.
According to the ABA, leading stablecoin issuers would likely deposit their reserves in larger banks, bypassing community banks.