The US crypto industry's key legislative push, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields, a topic that has become a significant point of contention between bankers and the White House. Bankers have recently countered a White House economists' report that downplayed the risks stablecoins pose to bank deposits, arguing that the wrong scenario is being analyzed.
Instead of considering the effects of banning stablecoin yields, the American Bankers Association believes the focus should be on the consequences of allowing such yields to continue. According to ABA economists, 'The CEA paper minimizes the core risk by starting from the wrong question.' They emphasize that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits.
This ongoing debate has effectively derailed Senate legislation for months, with lawmakers from both parties being swayed by bankers' concerns that depositors might abandon traditional banks for higher-yielding stablecoins. A compromise was proposed to ban yield on stablecoin holdings resembling deposit accounts and only permit rewards programs for activity, but banks have not endorsed this solution.
As the debate prolongs, the likelihood of the Clarity Act passing through the Senate process diminishes. Crypto insiders have been vocal about the issue, while bank representatives have maintained a more reserved stance. The bankers argue that failing to intervene in stablecoin yields now could lead to rapid market growth, from $300 million to as much as $2 trillion, with yield becoming a key feature that accelerates the migration of funds out of bank deposits.
Furthermore, they suggest that leading stablecoin issuers would likely deposit their reserves in larger banks, bypassing community banks. The absence of a resolution on this matter may have significant implications for the future of crypto regulation in the US.