Bankers Warn Stablecoin Yields Could Drain Traditional Deposits
The American Bankers Association (ABA) has criticised a recent White House report on stablecoins. The group argues that the Council of Economic Advisers (CEA) analysis misses key risks tied to payment stablecoins and yield incentives. Their opposition centres on concerns that allowing yield could trigger a shift away from traditional bank deposits.
The ABA’s response targets the CEA’s report, which assesses the impact of prohibiting yield on stablecoins under the proposed CLARITY Act. The banking group dismisses the CEA’s focus on this scenario as misleading, claiming it ignores the bigger issue: whether permitting yield would speed up deposit migration from banks.
The ABA also challenges the CEA’s baseline assumption of a $300 billion stablecoin market. They argue this figure underestimates the market’s potential growth. According to the ABA, a larger stablecoin sector with yield could draw funds away from bank deposits, squeezing lending capacity and raising funding costs for banks. The CEA’s suggestion that banning yield would boost bank lending is met with scepticism. The ABA calls this estimate a 'rounding error' when compared to normal fluctuations in bank lending. Their core concern remains the risk of deposit flight, particularly from smaller, community-focused banks.
The ABA’s critique highlights a divide over how stablecoin policies could reshape banking. If yield is allowed, the group warns of reduced local credit availability and higher funding costs for banks. Their stance underscores the potential consequences for traditional deposit systems if stablecoin adoption accelerates.
