The White House has put a number on the banking industry’s central argument against stablecoin rewards. Banning them would raise bank lending by 0.02%.
The Council of Economic Advisers puts the gain at $2.1 billion against an $800 million annual cost to households and finds that large banks would take 76% of it—leaving $500 million for the community banks the campaign has been built around.
The CEA published the analysis, roughly nine hours before the Senate’s cloture vote on the Digital Asset Market Clarity Act at 18:15 UTC, as an update to its April paper with an interactive model attached.
What the Model Does
The paper ships with a browser tool letting readers change market size, reserve composition, yield sensitivity, and the Federal Reserve’s operating regime and watch the outputs update. That is unusual for a White House economic publication, and it is the point: critics are invited to run their own assumptions.
The mechanical argument is recirculation. Buying a stablecoin does not destroy a deposit. When an issuer buys a Treasury bill, the seller receives a bank deposit in exchange, and the funds change hands inside the system rather than leaving it. Only reserves held as locked bank cash sit outside the credit multiplier—roughly 12% at Circle, close to zero at Tether.
At baseline, with a $300 billion market and the Fed’s ample-reserves framework, a ban moves about $54 billion out of stablecoins. Only a thin slice becomes lending capacity, which is how $54 billion becomes $2.1 billion.
Scaling the Market Does Not Change Much
CEA ran the larger-market case. Holding reserve composition and the Fed’s framework constant, a $3.7 trillion market — 21% of today’s deposits — produces roughly $20 billion in additional lending, under 0.2% of loans.
The $531 billion figure critics cite requires four conditions at once: a six-fold rise in the stablecoin share of deposits, households at the top of the yield-sensitivity range, issuers holding every reserve dollar as locked cash, and the Fed abandoning ample reserves. Keeping ample reserves alone takes it to 0.6% of loans.
CEA grants each objection separately and reports the result: the wholesale-deposit haircut takes the baseline to between $2.9 billion and $4.4 billion, scarce reserves at today’s composition to about $15 billion, and fully locked reserves to $72 billion.
What the Bill Actually Does
The GENIUS Act, signed in July 2025, already bars permitted issuers from paying interest solely for holding tokens. What remains contested is whether exchanges, affiliates, and other intermediaries can offer activity-based rewards.
Section 10404 of the final CLARITY text, released on September 14 by Senators Cynthia Lummis, John Boozman, and Tim Scott, extends the prohibition to covered digital-asset service providers and affiliates paying yield solely for holding payment stablecoins or in a manner economically or functionally equivalent to bank-deposit interest. Activity- and transaction-based rewards survive, subject to rulemaking. Marketing stablecoins as FDIC-insured is barred.
A separate Treasury circuit breaker lets the secretary restrict rewards if substantial deposit flight from community banks is documented. That authority expires 18 months after enactment.
The Banks Want More
The coalition has not accepted it. On Monday, groups including the American Bankers Association, the Bank Policy Institute, and the Independent Community Bankers of America asked Senate leaders John Thune and Chuck Schumer to tighten the reward limits before the vote.
Their argument is about scale rather than the current market: that balance- or duration-linked rewards still function as interest, and that a circuit breaker triggered after flight has begun is not a safeguard. The Crypto Times reported the earlier campaign, in which 78 banking associations asked to strike the word “solely,” replace “economically or functionally equivalent” with “substantially similar,” and close any reward referencing account balances.
The 76% Problem
The distributional finding is the one the campaign has to answer. Community banks are the public face of the deposit-flight argument, but CEA’s model gives them 24% of any lending gain—because reserves are custodied at large institutions and stablecoin holders skew young, urban, and higher-income.
CEA describes even that 24% as an upper bound, noting that published tests find no statistically significant relationship between USDC growth and community bank deposits.
Prohibition only passes a cost-benefit test in the model if issuers hold more than about 60% of reserves as locked bank deposits. Circle holds 12%.
Both Sides in Front of Senators
White House digital-assets official Patrick Witt called deposit flight a myth on Monday, pointing to rising bank deposits across years of existing exchange rewards. Treasury Secretary Scott Bessent said he would use the circuit breaker if community banks were harmed, while arguing that a failed bill leaves banks with none of those tools and GENIUS as the status quo.
Alexander Grieve of Paradigm, a crypto investment firm that has lobbied for the legislation, made the same point more bluntly on X: if CLARITY dies, the GENIUS-only regime banks call intolerable remains, and the intermediary restrictions they want do not exist.
Banks can still argue the model understates runoff, treats reserve composition too generously, or ignores stablecoins becoming a default corporate cash account. CEA’s own document names assumptions running the other way—more than 80% of stablecoin activity occurs outside the United States, and the model treats banks as price takers when deposit market power would let them cut rates as households return.
The Vote
Tuesday’s action is cloture on the motion to proceed, requiring 60 votes. Republicans hold 53 seats. The bill cleared Senate Banking 15-9 in May 2026, with Ruben Gallego and Angela Alsobrooks the only Democrats in favor at the committee. The House passed its version, 294-134, in July 2025.
The rewards fight is one of several live objections. State attorneys general have warned about enforcement design; Galaxy Digital’s Alex Thorn has flagged the absence of a criminal safe harbor for developers, and ethics language covering officials and spouses was added after White House negotiations.
A failed cloture vote would not end every crypto rulemaking track, but it would narrow the window for a comprehensive SEC and CFTC market-structure statute this year.
