The US crypto industry's push for regulatory clarity, particularly through the Digital Asset Market Clarity Act, has been hindered by disagreements over stablecoin yields. Bankers argue that these yields pose a significant risk to bank deposits, contradicting a recent White House economic report.
The American Bankers Association claims the White House economists mistakenly analyzed the scenario, focusing on the immediate effects of banning stablecoin yields rather than considering the long-term consequences of allowing them. The association believes that prohibiting yield on payment stablecoins is necessary to prevent them from becoming a risky alternative to insured bank deposits. This debate has stalled the Senate legislation, with lawmakers attempting to find a compromise that would ban yield on stablecoin holdings resembling deposit accounts and only permit rewards programs for specific activities.
However, the banking industry remains unconvinced, warning that the absence of intervention could lead to a rapid expansion of stablecoin markets, accelerating the migration of funds out of bank deposits. The bankers argue that even if leading stablecoin issuers were to deposit reserves in banks, these funds would likely go to larger institutions, bypassing community banks. As the debate continues, the prospects for the Digital Asset Market Clarity Act passing through the Senate process become increasingly uncertain.