stablecoins

A recent economic study released by the White House Council of Economic Advisers (CEA) has shed new light on the ongoing debate over banning yield on stablecoins. The study finds that a full prohibition on stablecoin yields would provide minimal benefits to the banking sector while imposing significant costs on consumers.

Key Findings
The CEA estimates that banning yield on stablecoins would increase total U.S. bank lending by only about 0.02%, equivalent to roughly $2.1 billion. However, this modest gain comes at a steep price for households, who would lose an estimated $800 million in stablecoin yield income. This results in a cost-benefit ratio of approximately 6.6 to 1 against the ban, indicating that the consumer losses far outweigh the banking sector's gains.
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Importantly, the study highlights that most of the additional lending would benefit large banks, with community banks seeing only a negligible increase. This directly challenges claims from banking lobbyists that stablecoin yields threaten the credit availability of smaller community banks.
Impact on Legislation
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These findings come at a critical time as lawmakers negotiate the Digital Asset Market Clarity Act (CLARITY), which seeks to regulate digital assets in the United States. The bill currently proposes banning “passive yield” on stablecoins but allows for “activity-based” rewards. The White House study strengthens the position of lawmakers advocating for a more balanced approach that preserves some form of regulated yield on stablecoins, supporting innovation and consumer choice.
Banking Industry Response
Despite the study’s conclusions, banking groups remain opposed to allowing any yield on stablecoins. They argue that the study underestimates future risks, particularly if stablecoin markets expand to $1-2 trillion, potentially accelerating deposit outflows and tightening credit for community banks.
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The Senate Banking Committee has yet to finalize the bill’s language on stablecoin yields, making the coming weeks crucial for the future of stablecoin regulation in the U.S.
Conclusion
The White House economic study reframes the stablecoin yield debate by showing that a blanket ban would offer minimal protection to banks but impose significant costs on consumers. As lawmakers continue to negotiate, the likelihood of a complete yield ban diminishes, with a more nuanced, regulated approach expected to emerge.
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