White House Says Stablecoin Yield Ban Helps Banks Little
- White House economists said a stablecoin yield ban would add little to lending overall.
- The report found no clear link between stablecoin growth and small bank deposits.
- Clarity Act talks continue as banks and crypto firms contest reward rules still.
The finding arrived as lawmakers, bankers, regulators, and crypto firms negotiate the Clarity Act in Washington. It also pushed back on a central banking industry claim about deposit losses. The Council of Economic Advisers said a yield ban would sacrifice consumer benefits while offering little support to lenders. “In short, a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings,” the report said.
White House Report Challenges Banking Lobby
The report addressed a dispute that has shaped the debate over stablecoin policy. Banks want tighter limits on how crypto firms can reward customers who hold digital dollars. The Genius Act already bars stablecoin issuers from paying customers yield on their holdings. Still, the text did not clearly settle whether third parties, including exchanges, could offer interest-like returns.
That gap has become a fresh target for banking groups. They want lawmakers to close it before the broader market structure debate moves ahead.
The banking lobby argues that community banks face the biggest risk. It says customers could move funds from deposit accounts to crypto platforms if stablecoins offer better returns.
According to the text, industry advocates claim small banks could lose more than $1.3 trillion in deposits if stablecoin rewards continue. They argue that such a shift would weaken the funding base used for lending.
Yet the White House economists rejected that view. They said stablecoin flows cluster around large institutions and show no meaningful link to changing community bank deposits.The report went further. “Altogether, the empirical evidence suggests that our own model overstates an already small effect of stablecoin yield on community banks,” it added.
Clarity Act Talks Gain New Pressure
The Clarity Act seeks to lock in digital asset rules, but negotiations have stalled since January. The deadlock deepened after Coinbase withdrew support for the bill. Now the report has added new weight to the crypto industry’s position. It arrived as senators search for a compromise that could restart the legislation.
President Donald Trump has urged negotiators to finish the bill. The text says he has sided with the crypto industry on whether stablecoin-related rewards should remain possible. Paul Grewal, Coinbase’s chief legal officer, welcomed the report on X. “We now know why stablecoin rewards critics wanted it suppressed,” he wrote.
He added: “The most respected economists in the government found nothing that shows rewards cause deposit ‘flight.’ Facts are hard sometimes.” His comments followed the White House release. At the same time, the American Bankers Association kept pressing its case. The group says yield-bearing stablecoins could pull deposits from traditional lenders and reduce funds available for loans.
That concern has influenced lawmakers from both parties. Senators Thom Tillis and Angela Alsobrooks have both sought a legislative compromise that would not harm smaller banks.
Related: White House Pushes Banks and Crypto Toward Stablecoin Deal
Where the Deposit Debate Now Stands
The White House economists argued that the banking case misses how stablecoins move through the financial system. In their example, money used to buy stablecoins often returns to banks after investment in Treasury bills.
That flow matters in the current debate. It suggests money may shift across institutions rather than disappear from the banking system altogether. So the central question now is clear: if the White House sees only a tiny lending gain, will lawmakers still restrict stablecoin rewards to protect banks?
The report has now become part of a broader fight between banks and crypto firms. That fight continues as Congress weighs how to move the Clarity Act forward.
