A report from White House economists has concluded that banning yield on stablecoins will have minimal effects on bank lending while presenting significant downsides for users. The analysis comes from the Council of Economic Advisers, an agency within the Executive Office of the President that provides economic advice to the president.
The report suggests that shifting funds from stablecoins back into bank deposits would translate to only a marginal increase in lending. Specifically, under the report's baseline scenario, total bank lending would see an increase of approximately $2.1 billion, which represents a mere 0.02% of the total $12 trillion loan market. For community banks, the anticipated lending growth would be even less, estimated at around $500 million, or about 0.026%.
This report arrives amidst a contentious debate between traditional banking organizations and the cryptocurrency sector over the implications of stablecoin yields. The Independent Community Bankers of America has expressed concerns that stablecoin yields could significantly reduce the volume of bank lending. In contrast, representatives from the crypto industry have strongly contested these claims, arguing that the evidence does not support such dire forecasts.
Economic Costs of a Stablecoin Yield Ban
While the potential benefits of a stablecoin yield ban appear limited, the report warns that the costs could be substantial. It estimates a net welfare loss of around $800 million per year, primarily because users would lose access to the yields generated by stablecoins. The report emphasizes that the cost-benefit ratio stands at approximately 6.6, indicating that the economic downsides would significantly outweigh any potential increases in lending.
To illustrate the challenging dynamics involved, the report notes that achieving lending effects in the hundreds of billions would require several unlikely assumptions: that the market share of stablecoins would increase sixfold, that all reserves would be shifted into segregated deposits, and that the Federal Reserve would abandon its current ample-reserves framework.
The issue of stablecoin yields has been further complicated by legislative actions. In July 2025, a law known as the GENIUS Act was signed by President Donald Trump, which prohibits stablecoin issuers from offering interest or yield to holders. However, third-party platforms, such as cryptocurrency exchanges, are still permitted to offer yields on stablecoins. The proposed Digital Asset Market Clarity Act aims to clarify whether yield should be universally restricted or allowed under specific conditions.
Progress on the CLARITY Act
In addition to the GENIUS Act, the ongoing legislative discussions include the CLARITY Act, which the U.S. House of Representatives passed on July 17, 2025. This act is currently awaiting a markup hearing in the Senate, which has faced delays. Senate Banking Committee Chair Tim Scott postponed a planned markup in January, with a new date yet to be determined.
Recently, Paul Grewal, Coinbase's chief legal officer, indicated that the CLARITY Act may soon see progress in the Senate Banking Committee. He noted that lawmakers appear close to agreement on critical provisions, although the resolution of disagreements surrounding stablecoin yield remains a significant hurdle.
As the discussions continue, both the banking and cryptocurrency sectors remain engaged in a broader dialogue about the future of stablecoin regulation and its potential impact on the financial landscape. The outcome of these discussions could shape the relationship between banks and the burgeoning crypto market, especially as more users turn to stablecoins for their financial needs.
Source: Cointelegraph News