The U.S. crypto industry's push for regulatory clarity, embodied in the Digital Asset Market Clarity Act, has been stalled due to disagreements over stablecoin yields and their perceived threat to traditional bank deposits.
Bankers have countered a White House report downplaying these risks, arguing that the analysis begins with the wrong premise. The American Bankers Association asserts that allowing stablecoin yields could lead to a significant migration of funds out of insured bank deposits into stablecoins, particularly if these yields outperform the interest rates offered by banks. This concern is central to the bankers' opposition to the Clarity Act, which aims to provide a regulatory framework for U.S. crypto markets.
The conflict has delayed Senate legislation, with lawmakers attempting to find a compromise that addresses the bankers' concerns about deposit stability while also fostering innovation in the payments sector. The proposed compromise involves banning yield on stablecoin holdings that resemble deposit accounts and permitting rewards programs only for transactional activity.
However, the banking industry remains skeptical, warning that the absence of regulatory intervention could lead to rapid growth in stablecoin markets, from $300 million to potentially $2 trillion, further exacerbating the risk of deposit migration. The bankers argue that in a larger stablecoin market, yield becomes a critical factor that could accelerate the movement of funds out of bank deposits, undermining the stability of the banking system.