The White House Says Stablecoin Yields Are Fine. Bankers Disagree.

TLDR

• The American Bankers Association says the White House asked the “wrong question” in its stablecoin yield study
• The White House Council of Economic Advisers found banning stablecoin yield would only increase bank lending by $2.1 billion, or 0.02%
• The ABA warns yield-paying stablecoins could drain deposits from community banks, not just the overall system
• A previous Treasury paper estimated stablecoin adoption could cause $6.6 trillion in deposit outflows
• The debate is tied to the GENIUS Act, which bans payment stablecoin issuers from paying yield to holders

The White House released a 21-page report on April 8 saying that banning stablecoin yields would have a small effect on bank lending. The Council of Economic Advisers said the ban would increase bank lending by about $2.1 billion, roughly 0.02% of a $12 trillion loan book.

The report also found that consumers would give up around $800 million in returns if yield was banned. White House economists concluded that stablecoin yield, under current conditions, is unlikely to trigger major deposit outflows.

The American Bankers Association responded quickly, saying the report focused on the wrong issue. The ABA argued the real question is what happens if yield-paying stablecoins are allowed to grow, not what happens if they are banned.

ABA chief economist Sayee Srinivasan and VP of banking research Yikai Wang said yield-paying stablecoins could become direct competition for bank deposits. They pointed to a potential market of $1 to $2 trillion in payment stablecoins backed by Treasuries and similar safe assets.

The Community Bank Problem

The ABA’s concern is not about the overall banking system. It is about smaller, community banks that may not be able to handle sudden deposit outflows.

Even if total deposits across all banks stay flat, money could shift from small banks to large ones. That would force community banks to borrow at higher costs or raise their own deposit rates.

Higher funding costs at community banks could mean less lending to local households, small businesses, and farmers. These borrowers rely heavily on relationship-based lenders rather than large national banks.

The White House paper argued that when consumers move money into stablecoins, issuers put the reserves into Treasury bills and money market funds. That sends most of the money back into the banking system, keeping total deposits roughly stable.

The ABA said this view misses what happens at the individual bank level. Losing deposits still hurts a community bank even if the broader system stays balanced.

The GENIUS Act Connection

The GENIUS Act, passed in 2025, created the first federal rules for payment stablecoins and included a ban on issuers paying yield directly to holders. However, that ban does not cover third-party platforms.

Coinbase currently offers USDC rewards to users through a setup that shares reserve income, similar to a high-yield savings account. Some versions of the proposed CLARITY Act would close that channel by stopping intermediaries from passing yield through.

The ABA said policymakers should treat the yield ban as a safeguard that keeps stablecoins in a payments role rather than letting them become a substitute for insured deposits. The ABA represents major banks including JPMorgan Chase, Goldman Sachs, and Citigroup.

More than 80% of stablecoin activity currently happens offshore, and some stablecoin issuers hold Treasury portfolios larger than certain national governments.

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