The US crypto industry's key legislative push, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields, which bankers claim could jeopardize bank deposits. In a rebuttal to the White House economists' report downplaying the risks, the American Bankers Association asserts that the wrong scenario was analyzed.
Instead of examining the consequences of banning stablecoin yields, the focus should be on the potential outcomes if such yields were permitted. The ABA economists argue that the White House report 'minimizes the core risk by starting from the wrong question' and that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits. This dispute, partly addressed in last year's GENIUS Act, has delayed Senate legislation for months. Despite predictions that the Clarity Act could receive a Senate Banking Committee hearing by the end of the month, no session has been scheduled.
The bankers' concerns center on the potential for depositors to abandon traditional banks in favor of higher-yielding stablecoins, prompting lawmakers to propose a compromise banning yield on stablecoin holdings resembling deposit accounts. However, the banking industry remains unsatisfied.
As the debate prolongs, the likelihood of passing the Clarity Act diminishes. The bankers warn that inaction on stablecoin yields could lead to rapid market growth, from $300 million to $2 trillion, with yield becoming a key driver of migration out of bank deposits.
According to the ABA, leading stablecoin issuers would likely deposit reserves in larger banks, bypassing community banks.