Key Points
- Banking industry leaders claim the White House focused on the incorrect aspect in its analysis of stablecoin yields
- Federal economists calculated that prohibiting stablecoin yields would boost bank lending by merely $2.1 billion, representing 0.02% growth
- Banking associations emphasize that yield-bearing stablecoins present deposit flight risks for smaller regional institutions rather than systemic concerns
- Earlier Treasury analysis projected potential deposit withdrawals reaching $6.6 trillion due to stablecoin expansion
- This discussion centers on the GENIUS Act’s provision preventing payment stablecoin providers from offering yields
On April 8, the White House published a comprehensive 21-page analysis concluding that prohibiting yields on stablecoins would produce minimal effects on lending activity. The Council of Economic Advisers determined such a prohibition would expand bank lending by approximately $2.1 billion, constituting roughly 0.02% of the $12 trillion total loan portfolio.
New analysis from the ABA econ team – the CEA studied the wrong question on stablecoin ‘yield’ and community banks. The real question is whether allowing yield would encourage deposit flight and harm economic growth.
Read it here: https://t.co/z7IShwNaHH pic.twitter.com/OIjQvjtGij
— American Bankers Association (@ABABankers) April 13, 2026
The analysis additionally calculated that consumers would forfeit approximately $800 million in potential returns under a yield prohibition. Federal economists determined that stablecoin yields, given present market conditions, pose little threat of triggering substantial deposit withdrawals.
The American Bankers Association issued a swift rebuttal, contending the analysis examined the incorrect variables. The banking organization maintained that policymakers should consider the consequences of permitting yield-bearing stablecoins to expand, rather than examining prohibition scenarios.
Sayee Srinivasan, chief economist at the ABA, alongside VP of banking research Yikai Wang, highlighted that yield-generating stablecoins represent emerging competition for traditional bank deposits. They identified a prospective market ranging from $1 trillion to $2 trillion in payment stablecoins supported by Treasury securities and comparable secure instruments.
Risks Facing Smaller Regional Lenders
The banking industry’s primary apprehension centers on smaller, community-oriented financial institutions that may struggle to manage unexpected deposit withdrawals.
Total system-wide deposits could remain unchanged while funds migrate from regional banks toward larger institutions. Such movement would compel community lenders to secure more expensive borrowing or increase their deposit interest rates.
Elevated funding expenses at regional banks translate to reduced lending capacity for local residents, small enterprises, and agricultural operations. These borrower segments depend substantially on relationship-focused lenders compared to nationwide banking corporations.
Federal analysts contended that consumer transfers into stablecoins result in issuers depositing reserves into Treasury bills and money market instruments. This process channels most funds back through the banking infrastructure, maintaining aggregate deposit levels.
Banking representatives countered that this perspective overlooks impacts on individual institutions. A community bank experiences harm from deposit losses regardless of system-wide stability.
Legislative Framework Under GENIUS Act
The GENIUS Act, enacted in 2025, established initial federal regulations for payment stablecoins and incorporated provisions preventing issuers from distributing yields to holders. This restriction excludes third-party service providers.
Coinbase presently provides USDC compensation to customers through arrangements that distribute reserve earnings, functioning similarly to high-yield deposit accounts. Certain iterations of the proposed CLARITY Act would eliminate this pathway by preventing intermediaries from transmitting yields.
Banking industry representatives argue that legislators should maintain the yield restriction as protection, ensuring stablecoins remain payment instruments rather than evolving into alternatives for insured deposits. The ABA’s membership includes prominent institutions such as JPMorgan Chase, Goldman Sachs, and Citigroup.
Current data shows over 80% of stablecoin transactions occur internationally, with several stablecoin providers maintaining Treasury holdings exceeding those of some sovereign nations.
