Banks challenge White House report on stablecoin yields
TL;DR
The American Bankers Association has criticized a White House report claiming banning stablecoin yields would have a negligible impact on banks. They argue that the real concern is the potential for deposit outflows from community banks to larger institutions.
Key points
- ABA criticized White House report on stablecoin yield ban
- Report claimed negligible impact on bank lending
- Real concern is deposit outflows from community banks
The American Bankers Association (ABA) has criticized a White House report that claimed banning stablecoin yields would only have a negligible impact on banks, arguing that the conclusion was reached by asking the “wrong question.”
The White House’s Council of Economic Advisers claimed in a research paper on Wednesday, on the “Effects of Stablecoin Yield Prohibition on Bank Lending,” that under a baseline scenario, banning stablecoin yield may only increase bank lending by $2.1 billion, representing a marginal net increase of about 0.02%.
ABA chief economist Sayee Srinivasan and vice president for banking and economic research Yikai Wang said in a statement on Monday that the “live policy concern” is not whether prohibiting yield on stablecoins would impact bank lending but whether allowing yield on stablecoins would encourage deposit outflows, particularly from community banks.
Srinivasan and Wang said that even if total deposits in the banking system remain unchanged, more funds would likely move from smaller banks to large institutions, which would raise the funding costs of community banks and reduce local lending.
Some of these smaller banks may not have enough balance sheet flexibility to absorb these outflows without resorting to higher-cost wholesale borrowing, the pair said.
Source: American Bankers Association
Members of the crypto and banking industries have met to negotiate provisions in a Senate bill that will outline how crypto is policed ahead of a potential markup this month, with a key sticking point being language around banning stablecoin yield payments.
Related: CFTC chair says agency is ready to oversee entire crypto market
The ABA’s concerns reflect a Treasury paper in April 2025 that estimated widespread stablecoin adoption could lead to $6.6 trillion worth of deposit outflows from the US banking system.
ABA admits stablecoin rewards are more attractive
Despite the fears, the ABA economic researchers acknowledged that households and businesses would be financially incentivized to move funds out of banks in pursuit of higher-paying stablecoins.
Coinbase CEO Brian Armstrong is among the crypto industry leaders who have criticized banks for paying near-zero interest on deposits for decades, arguing that stablecoin yield would force banks to compete on a more level playing field.
The ABA represents some of the banking industry's biggest names, including JPMorgan Chase, Goldman Sachs and Citigroup.
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Q&A
What did the White House report say about banning stablecoin yields?
The report claimed that banning stablecoin yields would only increase bank lending by $2.1 billion, a marginal increase of about 0.02%.
Why do banks oppose the prohibition of stablecoin yields?
Banks are concerned that allowing yield on stablecoins could lead to deposit outflows from community banks to larger institutions, raising funding costs for smaller banks.
Who are the key figures in the ABA's response to the White House report?
Sayee Srinivasan, chief economist, and Yikai Wang, vice president for banking and economic research, are the key figures criticizing the report.
