The U.S. crypto industry's key legislative effort, the Digital Asset Market Clarity Act, remains stalled due to disagreements over stablecoin yields. Bankers argue that these yields pose a significant risk to bank deposits, contradicting a recent White House economists' report.
The American Bankers Association asserts that the White House analysis is flawed, as it focuses on the wrong scenario. Instead of examining the effects of banning stablecoin yields, the White House should consider the consequences of allowing such yields.
The ABA economists state, 'The CEA paper minimizes the core risk by starting from the wrong question.' They believe that prohibiting yield for payment stablecoins is essential to prevent them from becoming a risky substitute for insured bank deposits. This debate has hindered the progress of the Senate legislation, despite lawmaker advocates predicting a potential hearing in the Senate Banking Committee. The conflict centers around the concern that depositors may abandon traditional banks in favor of higher-yielding stablecoins, leading to a compromise that would ban yield on stablecoin holdings resembling deposit accounts. However, the banking industry remains unsatisfied with this proposal.
As the debate prolongs, the likelihood of passing the Clarity Act diminishes. The bankers' latest arguments warn that the absence of intervention on stablecoin yield could lead to rapid market growth, accelerating the migration of funds out of bank deposits. They contend that this would primarily benefit larger institutions, rather than community banks.