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White House Report Challenges Banking Claims
A White House report released Wednesday directly disputes banking industry claims that stablecoin yields harm overall lending. The analysis, from the Council of Economic Advisers (CEA), found that banning these rewards would have a minimal impact on how much credit is created.
How the Study Modeled the Impact
Economists used an economic model that included data from the Federal Reserve and FDIC on deposits, lending, and bank liquidity. They also looked at industry reports on stablecoin reserves and expert estimates of how consumers shift their money. The findings suggest that limiting 'yield-like' rewards from crypto platforms could do more harm than good, costing consumers benefits for little gain in bank lending.
White House Rebuts Banker Arguments
The report pushes back against the American Bankers Association's argument that stablecoin yields pull funds away from banks, reducing lending. White House economists believe this view misinterprets financial dynamics. Money used for stablecoins is often put into Treasury bills, which then get deposited back into other banks, keeping total deposits steady. This cycle means the effect on lending is much smaller than claimed.
Community Banks Face Little Impact
The report also addresses concerns that community banks would be hit hardest. It estimates that community banks would see only about $500 million, or 0.026%, of any potential increase in lending if yields were banned. Since most stablecoin activity is already with larger firms, the real impact on smaller lenders is expected to be minimal.
Consumer Benefits and Future Laws
Removing stablecoin yields would lower returns for users on a growing type of dollar-based asset, creating an overall cost for consumers. The study argues that policymakers need to show clear benefits to the broader economy from restricting stablecoin yields. This analysis could affect ongoing discussions about digital asset legislation in Congress, where lawmakers are working on a deal to move forward with the long-awaited bill.