The US crypto industry's primary policy effort, the Digital Asset Market Clarity Act, has been stalled due to disagreements over stablecoin yields. Bankers have argued that reward programs associated with stablecoins could jeopardize bank deposits, contradicting a recent White House report that downplayed this risk. The American Bankers Association asserts that the White House economists' analysis was flawed, as it focused on the wrong scenario. Instead of examining the effects of banning stablecoin yields, the ABA suggests that the White House should have considered the consequences of allowing such yields.
The ABA economists stated, 'The CEA paper minimizes the core risk by starting from the wrong question.' This dispute has hindered the progress of the Clarity Act, which aims to regulate the US crypto market. The conflict has been ongoing, with senators from both parties expressing concerns about the potential impact of stablecoin yields on bank deposits. A compromise was proposed to ban yield on stablecoin holdings that resemble deposit accounts, but the banking industry has not been satisfied with this solution. Senator Cynthia Lummis, chair of the Banking Committee's digital assets subcommittee, has emphasized the need for clarity on this issue, stating that 'America needs Clarity.' The prolonged debate has made it increasingly challenging to pass the Clarity Act through the Senate.
The bankers argue 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, this could have severe consequences, particularly for community banks.