The debate over the Digital Asset Market Clarity Act has stalled due to disagreements on stablecoin yield, with bankers warning of risks to deposits if such yields are allowed. In response to a White House report downplaying these risks, the American Bankers Association argues that the analysis starts from the wrong premise. Instead of examining the effects of banning stablecoin yields, it should consider the consequences of permitting them.
The ABA economists argue that prohibiting yields on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits. This dispute has delayed Senate legislation, with lawmakers attempting to find a compromise that would ban yields on stablecoin holdings resembling deposit accounts and only permit rewards programs for activities, similar to credit-card rewards.
However, the banking industry remains unconvinced, warning that the absence of intervention could lead to rapid growth in stablecoin markets, accelerating the migration of funds out of bank deposits. The ABA suggests that leading stablecoin issuers would likely deposit their reserves in larger banks, bypassing community banks. As the debate continues, the prospects for the Clarity Act's passage become increasingly uncertain.