The US crypto industry's flagship policy effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields, which bankers argue pose a significant threat to bank deposits. In a response to a White House economists' report downplaying the risks, the American Bankers Association asserts that the analysis was based on the wrong premise. Instead of examining the effects of banning stablecoin yields, the focus should be on the consequences of allowing such yields to continue. According to ABA economists, 'The CEA paper underestimates the core risk by asking the wrong question.' They argue that prohibiting yield on payment stablecoins is essential to prevent them from becoming a risky substitute for insured bank deposits.
This ongoing debate has hindered the progress of the Senate legislation for months. Lawmakers had attempted to find a middle ground by proposing a ban on yield for stablecoin holdings that resemble deposit accounts, only permitting rewards programs for specific activities. However, the banking industry remains unconvinced.
The bankers warn that failing to intervene in stablecoin yields could lead to a rapid expansion of the stablecoin market, potentially reaching $2 trillion, and accelerating the migration of funds out of bank deposits. They also note that leading stablecoin issuers would likely deposit their reserves in larger banks, bypassing community banks.