Headline: White House report undercuts banks’ claims — banning stablecoin yields would barely move lending
A new 21-page analysis from the White House Council of Economic Advisers (CEA) pushes back directly on the banking industry’s central argument against stablecoin yields: that allowing crypto platforms to pay returns on dollar-pegged tokens would drain bank deposits and sharply reduce lending to households and small businesses.
Using a stylized economic model calibrated to Federal Reserve and FDIC data on deposits, lending and bank liquidity—alongside industry disclosures about stablecoin reserves and academic estimates of how consumers shift funds—the CEA finds the opposite. A ban on “yield-like” rewards for stablecoins would have only a negligible effect on credit creation, the report says, while costing consumers competitive returns on dollar assets.
What the report analyzed
- The report specifically assesses the effects of the GENIUS Act (signed July 2025) and warns that proposed updates to the Digital Asset Market Clarity Act that would further restrict yield-like rewards from intermediaries such as Coinbase could be counterproductive.
- The CEA’s model tracks how money used to buy stablecoins is commonly invested in short-term instruments like Treasury bills and then redeposited into the banking system, blunting any net withdrawal of deposit funding available for lending.
Key findings and numbers
- Even a full prohibition on stablecoin yields would only marginally increase lending. The report estimates community banks would receive about 24% of any incremental lending under a yield ban—roughly $500 million—equal to only a 0.026% boost.
- Only about 12% of stablecoin reserves (in the report’s baseline) are held in forms that could meaningfully restrict bank lending; reserve requirements and bank liquidity buffers further dilute any potential effect on borrowers.
- The CEA describes a multi-step “dampening” process: tens of billions may shift between deposits and stablecoins, but only a small fraction ultimately becomes new loans.
Why this matters to the policy fight
- The study undercuts a central banker talking point advanced by groups like the American Bankers Association (ABA): that competitive stablecoin yields will siphon deposits from banks and harm community lenders. The CEA says the claim misunderstands how reserves and deposits circulate under the current “ample reserves” Federal Reserve framework.
- Policymakers would need to assume several extreme, unlikely conditions—an enormous expansion of the stablecoin market, reserves fully sequestered from the banking system, and a shift away from the Fed’s ample-reserves regime—to generate large lending effects. Absent those stacked scenarios, the impact remains marginal.
Consumer and welfare implications
- The White House economists also frame the issue around consumers: forbidding yield would reduce returns on an expanding category of dollar-denominated assets without delivering meaningful improvements in credit availability. The CEA judges that a prohibition would carry a net welfare cost because it deprives users of competitive yields while offering little benefit to small businesses or households that rely on bank loans.
Political context
- The report arrives amid a high-stakes standoff between U.S. banks and the crypto industry that has slowed digital asset legislation in Congress. Lawmakers, industry actors and banking groups have been negotiating revisions to the stalled Clarity Act; the administration has pressed for a compromise that advances the bill. Senators such as Thom Tillis (R) and Angela Alsobrooks (D) have been focused on protecting community banks, a concern the ABA has emphasized in lobbying against stablecoin yields.
Bottom line
The White House analysis gives the crypto industry a data-backed argument: restricting stablecoin yields would do little to bolster bank lending but would remove a consumer-facing benefit of competing dollar assets. According to the CEA, the case for a yield ban — at least on the basis of protecting credit for households and small businesses — remains unproven.
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