The U.S. cryptocurrency industry's key legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields.
Bankers have voiced concerns that the industry's reward programs pose a significant threat to traditional bank deposits. In response to a White House economic report downplaying these risks, the American Bankers Association asserts that the analysis is flawed, focusing on the wrong scenario. The ABA argues that the real concern is what would happen if stablecoin yields were allowed to continue, rather than the hypothetical scenario of a ban. According to ABA economists, 'The CEA paper underestimates the core risk by asking the wrong question.' They believe that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky alternative to insured bank deposits.
This debate has effectively derailed Senate legislation for months, despite lawmakers' efforts to find a compromise. The proposed ban on yield for stablecoin holdings that resemble deposit accounts has not been met with enthusiasm from banks. Senator Cynthia Lummis, chair of the Banking Committee's digital assets subcommittee, has been advocating for the passage of the Clarity Act, emphasizing that 'America needs Clarity.' As the debate continues, the likelihood of the bill passing through the Senate process diminishes.
Crypto insiders have been vocal about the issue, while bank representatives have been more reserved. The bankers' latest argument suggests that without intervention, the stablecoin market could rapidly expand from $300 million to $2 trillion, with yield becoming a key driver of migration out of bank deposits. They also argue that leading stablecoin issuers would likely deposit their reserves in larger banks, bypassing community banks.