The US cryptocurrency policy, specifically the Digital Asset Market Clarity Act, has been stalled due to disagreements over stablecoin yields, which bankers claim poses a risk to bank deposits. In response to a White House report downplaying the threat, the American Bankers Association argues that the economists mistakenly analyzed the wrong scenario. Instead of examining the consequences of banning stablecoin yields, they should have considered the implications of allowing such returns. The bankers assert that prohibiting yield on payment stablecoins is essential to prevent them from becoming a risky substitute for insured bank deposits.
This debate has hindered the progress of the Clarity Act, with lawmakers attempting to find a compromise that addresses the concerns of both parties. The proposed legislation aims to regulate the US crypto market, but the dispute over stablecoin yields has led to significant delays. The American Bankers Association warns that without intervention, the stablecoin market could rapidly expand, leading to a substantial migration of funds out of bank deposits, which would primarily affect community banks.
The bankers' arguments suggest that the absence of regulation would allow stablecoin markets to grow from $300 million to $2 trillion, with yield becoming a key mechanism driving this growth.