- The American Bankers Association has questioned research suggesting that yield-generating stablecoins will not worsen deposit and loan performance.
- They see risks in the market not in its current form, but in its developed form, predicting growth in the total capitalization of stablecoins to $2-3 trillion.
Yield-generating stablecoins are becoming a direct threat to traditional banking models. In this regard, the American Bankers Association (further Association) challenged the Council of Economic Advisers’ study (further Council), supported by the White House, according to which the ban on stablecoin yields will have a minimal impact on lending activity.
The move highlights growing disagreement between politicians, cryptocurrency industry representatives and banking stakeholders.
The article’s authors, the Association’s chief economist, Saiee Srinavasan, and its vice president for banking and economic research, Ikai Wang, highlighted the study’s inaccuracies:
Policymakers should not be complacent about research showing that banning stablecoin yields could have little short-term impact on aggregate lending.
A controversial scenario is whether allowing income from payment stablecoins will accelerate the migration of deposits, especially from local banks, as this will lead to higher funding costs and a reduction in local lending.
By focusing on the consequences of a ban, the Council’s paper creates a false sense of security while avoiding a far more important scenario: the rapid growth of revenue-generating payment stablecoins.
Research The White House found that banning stablecoin income would increase bank lending by just 0,02%, a minor change from typical quarterly fluctuations.
The analysis presented yield caps as having a limited short-term impact, supporting the view that current stablecoin activity does not significantly reduce overall lending. However, critics argue that such a narrow focus ignores the risks associated with future market expansion and structural changes in deposit distribution.
The article emphasized that scale is a determining factor in assessing impact. The baseline, according to the Council’s work, currently assumes an immature stablecoin market of approximately $300 billion. This will not be comparable to the future market, which will reach $1–2 trillion. In a larger market, yield becomes the primary driver of deposit outflows, not a secondary factor.
The Association’s analysis found that the credit impact could be significant, including a reduction in lending of $4,4 billion to $8,7 billion within a single state, such as Iowa. These changes would disproportionately affect local banks, which rely on a stable deposit base to fund local lending.
Ultimately, the authors framed the problem as a structural risk for credit markets:
The Council’s report downplays the main risk by asking the wrong question. There is already ample evidence and analysis showing that a yield ban on payment stablecoins is a prudent precaution.
This policy will allow stablecoins to develop as an innovation in the payments sector, rather than as an economically risky replacement for insured bank deposits.
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