The US crypto industry's efforts to pass the Digital Asset Market Clarity Act have been hindered by a contentious issue surrounding stablecoin yields, which bankers argue could jeopardize bank deposits. In response to a White House report downplaying the risks, the American Bankers Association asserts that the Council of Economic Advisers is analyzing the situation from the wrong perspective.
Instead of examining the effects of banning stablecoin yields, the ABA believes the focus should be on the potential consequences of allowing such yields to continue. ABA economists argue that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a high-risk substitute for insured bank deposits.
This disagreement has stalled the Senate legislation for months, despite predictions that it could be heard by the Senate Banking Committee before the end of the month. Lawmakers have proposed a compromise that would ban yield on stablecoin holdings resembling deposit accounts, but the banking industry remains unconvinced. The ongoing debate has sparked concerns that the longer it takes to resolve, the more challenging it will be to pass the Clarity Act.
The American Bankers Association warns that failing to intervene in stablecoin yields could lead to rapid market growth, resulting in a significant migration of funds out of bank deposits and into stablecoin markets, potentially reaching $2 trillion. This could have a devastating impact on community banks, as leading stablecoin issuers are likely to deposit their reserves in larger institutions.