The US crypto industry's main legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers have reignited the debate, claiming that the industry's reward programs pose a threat to bank deposits. In response to a White House report downplaying the risks, the American Bankers Association asserts that the Council of Economic Advisers is analyzing the situation from the wrong perspective.
Instead of considering the impact of a ban on stablecoin yields, the ABA argues that the focus should be on the potential consequences of allowing such returns. The ABA economists state, 'The CEA paper minimizes the core risk by starting from the wrong question.' They believe 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 been ongoing, with lawmakers attempting to find a compromise that would ban yield on stablecoin holdings resembling deposit accounts and only permit rewards programs for activity.
However, the banks have not endorsed this proposal. As the debate continues, the likelihood of the Clarity Act passing through the Senate process and reaching a floor vote decreases.
The bankers warn that failing to intervene in stablecoin yields could lead to rapid market growth, resulting in a significant 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.