A new White House report says stablecoin yields are unlikely to have any serious impact on bank lending. This challenges the concerns raised by some banks, which have warned that these returns could weaken the traditional system.
The report, published on Wednesday by the Council of Economic Advisers, said banning stablecoin yield would do very little for bank lending.
It estimates that total lending would rise by only about $2.1 billion, which is roughly 0.02 percent of the $12 trillion loan market.
That directly goes against the argument made by some banking groups, including the Independent Community Bankers of America.
These groups have said that stablecoin yields could pull money away from banks and hurt lending, but the report suggests the impact would be minimal.
However, the White House report does not support this view.
The report said that even if money moves out of stablecoins and back into banks, it would not really change much.
Bank lending gains looked small in the White House model
The Council of Economic Advisers said the expected benefit for smaller banks would still be limited.
Under the report’s model, community banks, defined as lenders with less than $10 billion in assets, would account for about $500 million of the added lending.
That would be an increase of just 0.026 percent, which shows the gain would be very small.
Most of the small increase would go to large banks, not smaller ones. The report says 76 percent of the extra lending in the baseline case would come from bigger institutions.
So even if the goal of a yield ban is to help protect community banks, the real impact would still be very limited.
This shows that shifting money from stablecoins into bank deposits does not really boost lending in a meaningful way. In reality, banks do not turn every new deposit into loans.
The researchers also looked at an extreme case to see how big the impact could get.
They assumed the stablecoin market becomes six times larger compared to bank deposits, all reserves are kept as cash instead of Treasuries, and the Federal Reserve changes its current policy approach.
Even with all these unlikely conditions combined, the results were still limited. Total bank lending would increase by about $531 billion, or 4.4 percent.
Lending at community banks would rise by $129 billion, which is a 6.7 percent increase.
The authors say this scenario is not realistic. They explain that current policies and how reserves are managed today make such an outcome very unlikely.
Economists say consumers would pay the higher price
While the report plays down the risks to banks, it points to a different concern. It says banning stablecoin rewards could come with real costs. The estimate shows a net loss of about $800 million each year.
This loss mainly comes from users missing out on returns they earn from stablecoins. For many people, these yields work like an alternative to traditional savings.
If they are removed, it could limit financial options, especially for those who rely on digital assets for payments or saving money.
The report also explains why stablecoins remain attractive to users, even when they are fully backed. Unlike regular bank deposits, dollar-backed stablecoins can move across global blockchain networks at any time and settle almost instantly.
For many users, especially those dealing with cross-border payments or digital asset markets, this speed and flexibility matter just as much as earning yield.
Stablecoin yield ban comes with clear trade-offs
In the end, the report says banning yield on stablecoins does little to protect bank lending. At the same time, it takes away a clear benefit for users who can earn steady and transparent returns on their digital dollars.
The researchers do not say whether stablecoins should offer yield or not. Instead, they focus on giving data.
The idea is to help lawmakers better understand the trade-offs between financial innovation, user choice, and the stability of the banking system.
“Producing lending effects in the hundreds of billions requires simultaneously assuming the stablecoin share sextuples, all reserves shift into segregated deposits, and the Federal Reserve abandons its ample-reserves framework,” the report stated.
The report comes as U.S. stablecoin rules are still developing under the GENIUS Act, which became law in July last year.
The law requires stablecoins used for payments to be fully backed, one-to-one, with safe and liquid assets like cash, short-term U.S. Treasuries, or certain bank deposits. It also stops issuers from directly offering interest or yield to users holding stablecoins.
However, the report notes that some workarounds may still exist.
More recently, the Federal Deposit Insurance Corporation has proposed a new rule under the GENIUS Act to supervise stablecoin issuers in the United States.
Under the proposal, payment stablecoin issuers would not be allowed to offer interest or yield on payment stablecoins.