The US crypto industry's flagship legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers have intensified their warnings that reward programs associated with stablecoins pose a threat to bank deposits, contradicting a recent White House economic report. The American Bankers Association argues that the White House economists misframed the issue by focusing on the effects of banning stablecoin yields rather than considering the consequences of allowing them.
ABA economists assert that prohibiting yield on payment stablecoins is essential to prevent them from becoming a risky substitute for insured bank deposits. This dispute has hindered the progress of the Clarity Act, with lawmakers struggling to find a compromise between the banking industry's concerns and the crypto industry's push for regulatory clarity. Senators have proposed a compromise that would restrict yield on stablecoin holdings resembling deposit accounts, but bankers remain unsatisfied. As the debate prolongs, the prospects for the Clarity Act's passage diminish.
The bankers warn that inaction on stablecoin yields could lead to rapid market growth, accelerating the migration of funds out of bank deposits and primarily benefiting larger institutions at the expense of community banks.