The US crypto industry's main policy push, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields, which bankers claim pose a significant threat to traditional bank deposits. In response to a White House report downplaying the risks, the American Bankers Association asserts that the economists' analysis is flawed, focusing on the wrong scenario.
Instead of examining the consequences of banning stablecoin yields, they should consider the implications of allowing such returns. The ABA economists argue that prohibiting yield on payment stablecoins is a necessary precaution, enabling stablecoins to develop as a payment innovation rather than a risky substitute for insured bank deposits. This debate has effectively derailed Senate legislation for months, with lawmakers struggling to find a compromise.
While a potential solution would ban yield on stablecoin holdings resembling deposit accounts, allowing only rewards programs for activity, the banking sector remains unsatisfied. As the debate prolongs, the chances of passing the Clarity Act diminish. The bankers warn that inaction on stablecoin yield could lead to rapid market growth, accelerating the migration of funds out of bank deposits, with larger institutions likely to benefit from reserve deposits rather than community banks.