The US crypto industry's primary legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers argue that these yields could endanger bank deposits, contrary to a recent White House report. The American Bankers Association asserts that the White House economists' analysis was misguided, as it focused on the wrong scenario. Instead of examining the effects of banning stablecoin yields, they should have considered the consequences of allowing such yields.
The ABA economists stated, 'The CEA paper downplays the core risk by starting with the wrong question.' They believe that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits. This debate has hindered the progress of the Clarity Act, which aims to regulate US crypto markets. Lawmakers had proposed a compromise to ban yield on stablecoin holdings resembling deposit accounts, but banks remain unsatisfied. Senator Cynthia Lummis, chair of the Banking Committee's digital assets subcommittee, has been advocating for the Clarity Act, stating that 'America needs Clarity.' The prolonged debate may jeopardize the bill's chances of passing through the Senate.
The bankers argue that failing to intervene in stablecoin yields could lead to a rapid expansion of the stablecoin market, resulting in a significant migration of funds out of bank deposits. According to the ABA, leading stablecoin issuers would likely deposit their reserves in larger banks, rather than community banks.