The American Bankers Association has sharply criticized a White House report that found prohibiting stablecoin yields would have minimal impact on bank lending. ABA economists argue the administration asked the “wrong question,” stating the real concern is whether allowing yield would trigger significant deposit outflows from community banks. This debate is central as lawmakers negotiate a major crypto regulatory bill.
The American Bankers Association has criticized a White House economic report on stablecoin yields, arguing it asked the “wrong question.” The White House’s Council of Economic Advisers had concluded that banning stablecoin yield would increase bank lending by only $2.1 billion, a marginal 0.02% net increase.
ABA chief economist Sayee Srinivasan and vice president for banking and economic research Yikai Wang said in a statement that the “live policy concern” is not the lending impact of a ban. They stated the actual issue is whether allowing yield would encourage deposit outflows, particularly from community banks.
The economists warned that funds would likely move from smaller banks to larger institutions even if total deposits remained unchanged. They said this would raise funding costs for community banks and reduce local lending, with some smaller banks possibly needing higher-cost wholesale borrowing.
The ABA’s concerns reflect a prior U.S. Treasury Department estimate that widespread stablecoin adoption could lead to $6.6 trillion in deposit outflows. This debate is a key sticking point in ongoing negotiations for a Senate cryptocurrency regulation bill.
The association’s researchers acknowledged that households and businesses would be financially incentivized to move funds for higher-paying stablecoins. Coinbase CEO Brian Armstrong has among others criticized banks for paying near-zero interest on deposits for decades.
The American Bankers Association represents major institutions including JPMorgan Chase, Goldman Sachs, and Citigroup. Members of the crypto and banking industries are currently meeting to negotiate provisions in the forthcoming Senate legislation.
