In a positive development for the cryptocurrency industry, a recent study conducted by White House economists confirmed that stablecoin returns will not harm community banks, and that banning them will not have a tangible impact on public lending in the banking system.
Stablecoin returns are not a threat
On Wednesday, the Council of Economic Advisers (CEA) met. Released The upcoming study is about the key issue that has become a major point of contention between the banking and cryptocurrency industries over the past few months: stablecoin yields and their potential impact on deposit flight and bank lending.
For context, landmark cryptocurrency legislation, the GENIUS Act, requires issuers to hold reserves that back existing stablecoins on a one-to-one basis and hold those reserves in certain assets, including the US dollar, Federal Reserve notes, and short-term US Treasury securities.
The bill also introduced major restrictions preventing issuers from offering any form of interest or return to stablecoin holders. The banking industry has urged US lawmakers to expand the scope of the ban to include digital asset exchanges, brokers, dealers and related entities, leading to a long debate and delay From the Cryptocurrency Market Structure Bill, also known as the Clarity Act.
While some analysts estimate the lending impact in the trillions of dollars, the CEA report found that eliminating stablecoin yields would only boost bank lending by $2.1 billion, equivalent to a 0.02% increase.
Large banks will do 76% of this additional lending, while community banks – with less than $10 billion in assets – will lend the remaining 24%. In our baseline, that adds up to $500 million in additional lending from community banks, meaning their lending is up 0.026%.
As they note, even under the worst assumptions, the CEA model produced only $521 billion in additional total lending, which equates to a 4.4% increase in bank loans as of the fourth quarter of 2025.
Furthermore, this number would require that the stablecoin market grow six times as a share of deposits, that all reserves be tied up in non-loanable cash rather than US Treasuries, and that Federal Reserve (The Federal Reserve) to “abandon its current monetary framework.”
“Even under these implausible conditions, community bank lending rises by only $129 billion, equivalent to a 6.7% increase,” White House economists asserted, concluding that a yield ban would only have a moderate impact on overall lending in the banking system.
The conditions for finding a positive welfare impact through production bans are similarly implausible. In short, a yield ban would do little to protect bank lending, while foregoing the consumer benefits of competitive returns on stablecoin holdings.
Regulatory uncertainty is more harmful than rewards
The CEA study directly contradicts one of the banking industry’s main arguments for banning stablecoin returns: it would mostly affect community banks. In January, Bank of America CEO Brian Moynihan He told investors The banking industry may face major challenges if the US Congress does not ban interest-bearing stablecoins.
During the fourth-quarter earnings call, the executive stated that up to $6 trillion in deposits, roughly 30% to 35% of all U.S. commercial bank deposits, could flow from the banking system into the stablecoin sector, citing Treasury Department studies.
The CEO emphasized that while Bank of America would not affected Through this issue, small and medium-sized businesses will be particularly harmed, because they are “largely lent to end consumers by the banking industry.”
Earlier this year, the Independent Community Bankers of America asserted that offering interest on stablecoins for payment could drain community bank deposits and limit the availability of credit to local economies.
The group emphasized that allowing digital asset entities to pay interest, yield, or “rewards” on stablecoins for payment would significantly reduce the ability of community banks to support local lending needs, potentially losing $1.3 trillion in deposits and $850 billion in loans.
However, Chris Giancarlo, former Chairman of the Commodity Futures Trading Commission (CFTC), said, He said In March, banks requested more regulatory clarity from the cryptocurrency industry. Banks will be reluctant to invest in new technology in the absence of clear rules, and their systems will eventually become obsolete, he said.
“But banks cannot afford regulatory uncertainty,” he added. “And their general counsels are telling their boards, ‘You can’t invest billions of dollars in this (…) unless you have regulatory certainty. (…) Banks need this clarity because they need to build this. They have to be at the forefront, not in the backguard of this innovation.’”
The total crypto market capitalization is at $2.42 trillion in the one-week chart. Source: TOTAL on TradingView
Featured image from Unsplash.com, chart from TradingView.com
Editing process Bitcoinist focuses on providing well-researched, accurate, and unbiased content. We adhere to strict sourcing standards, and every page is carefully reviewed by our team of senior technology experts and experienced editors. This process ensures the integrity, relevance, and value of our content to our readers.
