The US crypto industry's efforts to pass the Digital Asset Market Clarity Act have been hindered by a dispute over stablecoin yield, which bankers argue poses a risk to bank deposits. In response to a White House report downplaying the risks, the American Bankers Association has released a study arguing that the White House economists are analyzing the situation from the wrong perspective. The ABA contends that allowing stablecoin yield would lead to a significant migration of deposits out of traditional banks and into stablecoin markets, potentially destabilizing the banking system.
The conflict has stalled the Senate legislation, with lawmakers attempting to find a compromise that would ban yield on stablecoin holdings that resemble deposit accounts. The longer the debate continues, the more challenging it will be to pass the Clarity Act, which aims to regulate the US crypto market. The banking industry's concerns center on the potential for stablecoin yield to outpace the interest rates offered by banks, leading to a loss of depositors.
The ABA argues that the absence of intervention on stablecoin yield would allow the market to grow rapidly, from $300 million to $2 trillion, and that yield would become a key mechanism for accelerating the migration of deposits out of banks.