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White House economists said banning rewards wouldn't importantly boost banks' fiscal health, amplifying the crypto manufacture presumption successful the Clarity Act debate.
Apr 8, 2026, 2:14 p.m.
A White House report released Wednesday straight challenges the banking industry's claims that stablecoin yields would drain deposits and weaken lending to households and tiny businesses.
Instead, banning those stablecoin rewards would person lone a negligible interaction connected recognition creation, the analysis, released by the Council of Economic Advisers (CEA), found.
The White House economists down the 21-page study said their findings are based connected a stylized economical exemplary calibrated with Federal Reserve and FDIC information connected deposits, lending and slope liquidity, arsenic good arsenic manufacture disclosures connected stablecoin reserves and world estimates of however consumers displacement funds betwixt assets.
The report, which specifically analyzes the GENIUS Act, signed successful July 2025, besides warns that projected updates to the Digital Asset Market Clarity Act to further restrict "yield-like" rewards from intermediaries similar Coinbase could beryllium counterproductive.
“In short, a output prohibition would bash precise small to support slope lending, portion forgoing the user benefits of competitory returns connected stablecoin holdings,” the study emphasized. It added that “the conditions for uncovering a affirmative payment effect from prohibiting output are simply implausible.”
The study marks the latest improvement successful the ongoing struggle betwixt U.S. banks and the cryptocurrency manufacture that has stalled integer plus authorities successful Congress, wherever senators are seeking a compromise to unlock the stalled Clarity Act. President Donald Trump and his advisers person been anxious for negotiators — including the crypto industry, bankers and senators from some sides of the aisle — to onslaught a woody that advances the long-awaited bill, which is 1 of the administration's legislative priorities.
While the crypto firms and their legislative supporters reason they should beryllium allowed to connection yield-like rewards connected stablecoins, banks pass that would lead to funds being siphoned distant from the accepted fiscal system. But Wednesday's findings could undercut a halfway statement from banking groups: Even a afloat prohibition connected stablecoin output would summation lending lone marginally.
Ban does small to support lending
In different words, the study claimed, the prohibition would bash small to support lending portion stripping consumers of competitory returns.
The American Bankers Association (ABA) insists that if stablecoins statesman offering yields comparable to high-yield savings accounts, depositors volition determination wealth retired of banks and into integer dollars, reducing the funds banks usage to marque loans. The banking lobbyists person argued that assemblage bankers volition beryllium particularly harmed — an statement that caught the receptor of lawmakers specified arsenic Senators Thom Tillis, a Republican, and Angela Alsobrooks, a Democrat, who person been seeking a legislative compromise that won't harm Main Street institutions.
However, the White House economists said that the bankers' statement misunderstands however stablecoins interact with the broader fiscal system. In 1 example, the study describes however funds utilized to bargain stablecoins are often reinvested successful Treasury bills and yet redeposited into different banks, leaving wide deposit levels mostly unchanged,
The study besides addresses concerns that assemblage banks could suffer retired arsenic funds travel into Treasuries and ample institutions, uncovering the interaction connected smaller lenders is limited. It estimates assemblage banks would relationship for conscionable 24% of immoderate incremental lending nether a output prohibition oregon astir $500 million, and notes that stablecoin enactment is already concentrated among ample fiscal institutions, suggesting the real-world effect connected smaller banks whitethorn beryllium adjacent smaller.
“The reply lies not successful the level of deposits, but successful their composition,” the study explained. Under the existent “ample reserves” regime, these shifts betwixt banks bash not unit lenders to shrink their equilibrium sheets.
Rather than disappearing from the banking sector, overmuch of the wealth backing stablecoins is recycled done it. When issuers put reserves successful Treasury bills oregon akin instruments, those funds typically extremity up redeposited elsewhere successful the banking system, preserving wide deposit levels adjacent if idiosyncratic banks spot outflows.
Only a tiny stock of stablecoin reserves, estimated astatine astir 12% successful the report’s baseline, is held successful forms that could meaningfully restrict lending. Even then, the effect is heavy diluted by slope reserve requirements and liquidity buffers, which sorb overmuch of the imaginable interaction earlier it reaches borrowers.
The effect is simply a multi-step dampening effect: tens of billions of dollars whitethorn determination betwixt stablecoins and deposits, but lone a fraction yet translates into caller loans.
That dynamic besides weakens the statement that stablecoin yields airs a peculiar menace to assemblage banks. According to the report, smaller lenders would spot conscionable $500 cardinal successful further lending nether a output ban, an summation of astir 0.026%.
In different words, the White House economists contend that the argumentation delivers minimal benefits to the precise institutions it is often framed arsenic protecting.
The study said generating ample lending effects requires hypothetically stacking respective utmost conditions astatine once: a stablecoin marketplace galore times larger than today’s, reserves afloat locked distant from lending and a displacement successful Federal Reserve argumentation distant from its existent ample-reserves framework. Absent those scenarios, the interaction remains marginal, it said.
Costs autumn connected consumers
The study besides reinforced the crypto industry’s arguments successful user terms. By eliminating yield, policymakers would efficaciously trim returns connected a increasing class of dollar-based assets that vie with accepted deposits.
The economists estimated that specified a prohibition would transportation a nett payment cost, arsenic users springiness up output without receiving meaningful improvements successful recognition availability successful return. Rather than assuming stablecoin yields are destabilizing, the study suggested policymakers indispensable show that restricting them would present tangible benefits to the existent economy, peculiarly to tiny businesses and households that trust connected slope lending.
So far, according to the administration’s ain economists, that lawsuit remains unproven.
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