A recent report from White House economists has concluded that banning yields on stablecoins would have a minimal effect on bank lending, while imposing significant costs on users. The analysis was conducted by the Council of Economic Advisers, which provides economic advice to the President of the United States.

The report, published on Wednesday, indicates that the transition of funds from stablecoins back to bank deposits would not lead to any major increase in lending. It estimates that total bank lending could rise by approximately $2.1 billion, which represents a mere 0.02% of the $12 trillion loan market. Community banks, in particular, would see even smaller gains, with an expected increase of around $500 million, or about 0.026%.

This report emerges amidst ongoing tensions between the banking sector and the cryptocurrency industry regarding the impact of stablecoin yields. Banking organizations, such as the Independent Community Bankers of America, have expressed concerns that the yields from stablecoins could significantly reduce bank lending capabilities. However, representatives from the crypto sector have contested these claims.

Economic Costs of a Stablecoin Yield Ban

While the potential benefits of a ban on stablecoin yields appear limited, the report highlights that such a ban could incur substantial economic costs. The analysis estimates a net welfare loss of approximately $800 million per year, primarily because users would be deprived of the opportunity to earn yields on their stablecoin holdings. The cost-benefit analysis shows a ratio of about 6.6, indicating that the economic drawbacks would far outweigh any advantages in terms of increased lending.

The report further elaborates that achieving a significant impact on lending would necessitate unrealistic assumptions, such as a sixfold increase in the share of stablecoins, a complete shift of all reserves into segregated deposits, and the Federal Reserve abandoning its ample-reserves framework.

In July 2025, legislation known as the GENIUS Act was enacted, which prohibits stablecoin issuers from providing interest or yield to holders. Nonetheless, third-party platforms, including exchanges, are still permitted to offer yield on stablecoins. The proposed Digital Asset Market Clarity Act seeks to clarify whether yield offerings should be universally restricted or allowed under specific conditions.

Progress on the CLARITY Act

In addition to the GENIUS Act, the US House of Representatives passed the CLARITY Act on July 17, 2025. However, a planned markup in the Senate Banking Committee was delayed by Chair Tim Scott earlier this year and has yet to be rescheduled. Recent statements from the chief legal officer of Coinbase, Paul Grewal, suggest that the CLARITY Act is nearing a markup hearing in the Senate Banking Committee, as lawmakers seem to be close to reaching an agreement on key provisions. The progress on this legislation is contingent on resolving existing disagreements regarding stablecoin yields.

Overall, the White House report presents a complex picture of the potential impacts of stablecoin yields on the banking sector and the broader economy. While the immediate effects on lending may be negligible, the long-term implications of restricting yields could pose significant economic challenges for users reliant on these financial instruments.

Source: Cointelegraph News