The American Bankers Association (ABA) has criticized a report from the White House Council of Economic Advisers.
The report argued that a ban on stablecoin yield would have only a limited effect on the banking sector.
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The ABA says the authors asked the wrong question. In the group’s view, the main issue is not how a yield ban would affect total lending. The real issue is whether allowing yield on stablecoins could trigger a large outflow of deposits from banks, especially smaller regional and community banks.
The ABA’s Position
ABA Chief Economist Sayee Srinivasan and Vice President for Banking and Capital Markets Research Yiqai Wang said that even if total deposits across the banking system stay flat, funds could still shift from smaller banks to larger ones. That would raise funding costs for small banks and reduce their ability to support local lending.
The ABA acknowledges that households and businesses would have a clear financial incentive to move money into higher-yielding stablecoins. Still, the association argues that such a shift would create structural risks for the banking system.
Related: South Korea Plans to Regulate RWA and Stablecoins Under Existing Financial Laws
Progress on the CLARITY Act
The debate over stablecoin yield remains one of the main sticking points in discussions around the CLARITY Act, a bill that would establish a broader regulatory framework for the U.S. crypto industry.
Senator Thom Tillis, a Republican from North Carolina, said he expects to release a compromise version of the language on this issue later this week. He is working on the text with Senator Angela Alsobrooks, a Democrat from Maryland.
Tillis also mentioned the possibility of holding a special “crypto-palooza” event on Capitol Hill with representatives from both the banking and crypto sectors in an effort to resolve the dispute once and for all.
Related: Hong Kong Issues First Stablecoin Licenses to HSBC and Anchorpoint Financial
