The US crypto industry's primary legislative effort, the Digital Asset Market Clarity Act, has stalled due to disagreements over stablecoin yield. Bankers argue that allowing stablecoin rewards could lead to a mass exodus of depositors from traditional banks, seeking higher returns from stablecoins.
The American Bankers Association claims that a recent White House economic report misunderstood the issue by analyzing the wrong scenario. Instead of examining the effects of banning stablecoin yield, the report should have considered the consequences of permitting such returns. The ABA economists assert that prohibiting yield on payment stablecoins is a necessary precaution to prevent them from becoming a risky substitute for insured bank deposits.
This debate has delayed the Senate legislation for months, with lawmakers struggling to find a compromise between the banking industry's concerns and the crypto industry's push for regulatory clarity. The longer the debate continues, the more challenging it will be to pass the Clarity Act.
The bankers' latest arguments warn that failing to intervene in stablecoin yield could lead to a rapid expansion of the stablecoin market, accelerating the migration of funds out of traditional bank deposits.