The US crypto industry's key legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers have reignited the debate, claiming that the rewards programs pose a threat to bank deposits. In response to a recent report from White House economists downplaying the risks, the American Bankers Association asserts that the analysis was based on a flawed premise. Instead of examining the effects of banning stablecoin yields, the report should have considered the consequences of allowing such returns.
The ABA economists argue that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky alternative to insured bank deposits. This dispute 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 the banking sector remains unsatisfied.
The prolonged debate may jeopardize the bill's chances of passing through the Senate. The bankers warn that failing to intervene in stablecoin yields could lead to a rapid expansion of the 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, bypassing community banks.