A report from the White House released this Wednesday counters banking industry claims regarding stablecoin yields undermining deposits and credit to small businesses and households. The study, conducted by the Council of Economic Advisers (CEA) over 21 pages, suggests that eliminating stablecoin rewards would minimally affect credit creation.
The economists’ analysis, grounded in a stylized economic model informed by Federal Reserve and FDIC data on deposits and lending, as well as industry disclosures about stablecoin reserves, indicates that any ban on yield-like rewards from platforms like Coinbase might be ineffective. This report evaluates the impact of the GENIUS Act, enacted in July 2025, and cautions against further restrictions proposed to the Digital Asset Market Clarity Act.
“A yield prohibition would minimally protect bank lending but sacrifice consumer benefits of competitive stablecoin returns,” emphasizes the report. It suggests that conditions for a positive outcome from banning yields are highly unlikely.
This release comes amid ongoing debates between U.S. banks and the cryptocurrency sector, which have stalled digital asset legislation in Congress. Senators are attempting to find middle ground for the Clarity Act, with President Donald Trump urging negotiations among crypto firms, bankers, and bipartisan senators.
Crypto companies argue for their right to offer stablecoin yields similar to high-yield savings accounts, while banks caution that such practices could drain funds from traditional banking systems. Nonetheless, this report undermines a key banking argument by showing that even a comprehensive yield ban would only slightly boost lending.
The American Bankers Association (ABA) argues that if stablecoins provide comparable yields to high-interest savings, depositors might shift their assets away from banks, impacting the money available for loans. This concern has resonated with lawmakers like Senators Thom Tillis and Angela Alsobrooks, who are searching for a legislative compromise.
However, the White House economists argue that the banking sector’s view misinterprets how stablecoins integrate into the financial system. They illustrate scenarios where funds used to purchase stablecoins get reinvested in Treasury bills and redeposited elsewhere, leaving overall deposit levels largely unaffected.
The report also addresses potential impacts on community banks by suggesting any loss would be minor. It estimates that community banks might see just 24% of incremental lending under a yield ban, amounting to about $500 million. Since stablecoin activities are mostly centered around larger financial institutions, the effect on smaller banks is likely even less significant.
“The key issue isn’t deposit levels but their composition,” explained the report. Under current “ample reserves” policies, shifts between banks don’t require reductions in balance sheets.
Most money backing stablecoins gets recycled within the banking sector when reserve investments in Treasury bills are redeposited elsewhere, maintaining overall deposit volumes despite individual bank outflows. Only a small portion of stablecoin reserves (around 12%) could significantly limit lending. However, this impact is mitigated by banks’ reserve requirements and liquidity buffers.
The report highlights that while billions may shift between stablecoins and deposits, only a fraction results in new loans. This dynamic also weakens the argument that stablecoin yields threaten community banks, which would see just $500 million in extra lending under a yield ban—a 0.026% increase.
According to the report, achieving significant lending effects requires stacking several extreme conditions: an inflated stablecoin market, reserves completely unavailable for lending, and a drastic shift from the Federal Reserve’s ample-reserves policy. Without these scenarios, impacts remain minimal.
The study also supports crypto industry claims by emphasizing consumer aspects. Prohibiting yields would reduce returns on an emerging category of dollar-based assets that compete with traditional deposits.
Economists estimated such a ban would result in a net welfare loss as users forgo yield without significant credit availability improvements. The report suggests policymakers need to prove restricting yields offers tangible benefits to the real economy, especially small businesses and households reliant on bank loans.
As per the administration’s economists, proving this case remains challenging.