Key Highlights
- ABA economists said the White House framed the stablecoin yield debate too narrowly by studying a ban on yield, not the effect of allowing it.
- The CEA’s April 8 paper said eliminating stablecoin yield would increase bank lending by $2.1 billion, including about $500 million from community banks.
- An Iowa-focused ABA-linked estimate projected $4.4 billion to $8.7 billion in lost lending if payment stablecoins grow much larger.
American bankers are pushing back against a White House study that downplayed the risks of stablecoin yield to the banking system, arguing that the Council of Economic Advisers examined the wrong policy question.
In a Banking Journal article published on Monday, ABA chief economist Sayee Srinivasan and VP for banking and economic research Yikai Wang said policymakers should focus on what happens if yield-paying payment stablecoins are allowed to scale, especially for community banks that rely heavily on local deposits to fund lending.
White House study focuses on yield ban, not yield allowance
The criticism follows the CEA’s April 8 paper, Effects of Stablecoin Yield Prohibition on Bank Lending. In its baseline model, the White House said eliminating stablecoin yield would increase total bank lending by $2.1 billion, or 0.02%, while community bank lending would rise by around $500 million.
The paper argued that most stablecoin reserves recirculate through the banking system and said only under what it described as implausible stacked assumptions would the lending impact become materially larger.
ABA says the real risk is deposit flight
ABA’s rebuttal says that the conclusion does not answer the main policy concern. According to the banking group, the real risk is that yield-like rewards on payment stablecoins could encourage deposit flight from smaller banks, forcing them to replace lost funding with higher-cost wholesale borrowing or higher deposit rates.
The group also argued that even if deposits remain somewhere inside the broader banking system, a shift away from community banks and toward large institutions or stablecoin reserve accounts could still reduce credit availability in local markets.
Stablecoin yield debate gains importance after GENIUS Act
The fight sits at the center of the post-GENIUS Act stablecoin debate. The White House paper notes that the law bars permitted stablecoin issuers from paying interest or yield directly, but does not explicitly prohibit affiliate or third-party arrangements that could offer yield-like products, adding that some versions of the proposed CLARITY Act would close that channel.
ABA and other banking groups have been urging Congress since January to shut what they call a loophole that could accelerate deposit migration out of traditional banks.
Why are community banks at risk?
To support that case, ABA-linked state analyses model much bigger consequences if payment stablecoins grow from roughly today’s $300 billion market toward $1 trillion to $2 trillion over time. One Iowa-focused estimate projected $5.3 billion to $10.6 billion in deposit outflows and a $4.4 billion to $8.7 billion drop in lending to households and businesses.
Those figures come from advocacy-backed modeling rather than the White House paper itself, but they show how sharply the two sides differ on whether stablecoin yield is a competitive product feature or a systemic funding risk for smaller lenders.
The White House is arguing that stablecoin yield would have only a limited effect on lending under current market conditions, while the banking industry says that framing offers false comfort because it does not fully capture how a much larger yield-driven stablecoin market could reshape deposit flows, funding costs, and local credit creation.
Also Read: Senator Lummis Urges Action on CLARITY Act Before 2026 Midterms
