A White House economic report concludes that banning yield on stablecoins would have minimal impact on bank lending. The analysis estimates such a ban would increase lending by only $2.1 billion while causing an $800 million annual welfare loss for consumers. This challenges a key argument used in congressional debates over stablecoin regulation.
A new White House report directly challenges the banking industry’s argument that stablecoin yield threatens the financial system. According to the report, prohibiting yield would boost bank lending by just 0.02%.
This negligible gain would come at a significant estimated cost of $800 million in annual consumer welfare losses. The findings arrive amid critical negotiations on the proposed CLARITY Act, which contains provisions to restrict yield-bearing products.
Banking groups have contended that yield could draw deposits away, reducing their capacity to lend. The White House analysis suggests these “deposit drain” concerns are substantially overstated.
It notes that most stablecoin reserves are held in instruments like Treasury bills, recycling capital back into the financial system. Only around 12% of reserves held as cash-like deposits meaningfully affect bank lending capacity.
The report frames stablecoins as part of a shift toward “narrow banking,” where assets are fully backed by safe reserves. This model can offer faster settlement and reduced credit risk, particularly for users outside traditional banking.
The analysis weakens the economic case for strict yield restrictions championed by some lawmakers. It highlights a clear tradeoff between slightly supporting banks and limiting consumer returns and digital payment innovation.
