The US crypto industry's primary legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers argue that these yields pose a significant threat to traditional bank deposits, contradicting a recent White House economic report. The American Bankers Association claims the White House economists analyzed the situation incorrectly, focusing on the wrong scenario. Instead of examining the effects of banning stablecoin yields, they should have considered the consequences of allowing such yields.
The ABA economists stated, 'The CEA paper minimizes the core risk by starting from the wrong question.' They believe a ban on stablecoin yields for payment stablecoins is essential to prevent them from becoming a risky substitute for insured bank deposits. This debate has delayed the Senate legislation for months, with lawmakers attempting to find a compromise. The proposed compromise would ban yield on stablecoin holdings that resemble deposit accounts, only permitting rewards programs for activity, similar to credit-card rewards.
However, banks have not endorsed this compromise. The longer the debate continues, the more challenging it will be to pass the Clarity Act. The bankers argue that without intervention, stablecoin markets could rapidly expand from $300 million to $2 trillion, with yield becoming a crucial mechanism that accelerates the migration of funds out of bank deposits.