The US crypto industry's main policy effort, the Digital Asset Market Clarity Act, has stalled over concerns about stablecoin yields, which bankers claim could lure depositors away from traditional banks. In a rebuttal to a White House report downplaying these risks, the American Bankers Association argues that economists analyzed the wrong scenario, focusing on the consequences of banning stablecoin yields rather than allowing them.
The ABA economists assert that prohibiting yield on payment stablecoins is a necessary precaution, enabling stablecoins to develop as a payments innovation rather than a substitute for insured bank deposits. This dispute has hindered the Senate legislation for months, despite lawmaker advocates predicting a necessary hearing in the Senate Banking Committee. Senators from both parties have been swayed by bankers' arguments that depositors would abandon traditional banks for higher stablecoin yields, leading to a compromise that would ban yield on stablecoin holdings resembling deposit accounts. However, the banking sector remains unsatisfied with this proposal.
As the debate prolongs, the prospects of passing the Clarity Act through the Senate process become increasingly challenging. The bankers' latest arguments warn that inaction on stablecoin yield could lead to rapid market growth, with yield becoming a key driver of migration from bank deposits to stablecoins, ultimately benefiting larger institutions at the expense of community banks.