The US crypto industry's efforts to advance the Digital Asset Market Clarity Act have been hindered by disagreements over stablecoin yields, despite the bill's primary focus on regulating US crypto markets. 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 argues that the economic advisors misinterpreted the issue.
Instead of analyzing the effects of banning stablecoin yields, they should have considered the 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 for payment stablecoins is essential to prevent them from becoming a risky substitute for insured bank deposits. This dispute has stalled the Senate legislation for months, with lawmakers attempting to find a compromise.
The proposed ban on yield for stablecoin holdings that resemble deposit accounts has not been well-received by banks. As the debate continues, the likelihood of passing the Clarity Act diminishes. Crypto insiders have been vocal about the issue, while bank representatives have been more reserved. The bankers argue that inaction on stablecoin yield would 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 reserves in larger banks, rather than community banks.