The US crypto industry's primary legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yield. Bankers have recently countered a White House report that downplayed the risks of stablecoins to bank deposits, claiming that the economists analyzed the wrong scenario.
The American Bankers Association asserts that allowing stablecoin yield could lead to a significant migration of funds out of bank deposits, posing a threat to the banking system. The association argues that prohibiting yield on payment stablecoins is a necessary precaution to prevent stablecoins from becoming a risky substitute for insured bank deposits.
This debate has hindered the progress of the Clarity Act, which aims to regulate the US crypto market. Lawmakers had proposed a compromise to ban yield on stablecoin holdings that resemble deposit accounts, but bankers remain concerned. The longer the debate continues, the more challenging it will be to pass the Clarity Act.
Bankers warn that without intervention, the stablecoin market could rapidly expand, leading to a significant migration of funds out of bank deposits, particularly from community banks.