White House analysis deals a blow to banks’ main argument in the CLARITY Act fight
A new 21‑page White House analysis is reshaping the debate over stablecoin regulation in Washington. Published Wednesday by the Council of Economic Advisers (CEA) and reported by Bloomberg, the study finds that banning yields on stablecoins would have almost no effect on bank lending — increasing it by only about 0.02% — undercutting the banking industry’s central rationale for restricting yield-bearing stablecoins.
The CEA built a model using Federal Reserve and FDIC data on deposits, lending and liquidity, along with industry disclosures and academic estimates of how consumers move money between assets. Its central conclusion: when people buy stablecoins, much of that cash is redeployed into Treasury bills and then largely returns to the banking system, so aggregate deposit levels remain broadly unchanged whether stablecoins pay yield or not. “In short, a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings,” the report says.
That finding hands crypto firms a White House‑backed rebuttal to warnings from groups like the American Bankers Association and the Independent Community Bankers of America, which have argued yield‑paying stablecoins could drain deposits from community lenders — with some estimates of potential losses reaching as high as $1.3 trillion. The CEA stress‑tested those claims and judged them implausible: even in an extreme scenario in which the stablecoin market expanded sixfold, reserves became unlendable, and the Fed changed its framework, a yield ban would lift lending by at most 6.7% — a package of conditions the report calls unlikely.
Crypto executives welcomed the analysis. Coinbase Chief Policy Officer Faryar Shirzad said the findings confirm “that stablecoins aren’t a threat to community banks.” Banking groups pushed back immediately, arguing the CEA model downplays how deposit outflows could change the composition of funds returning to banks — shifting them from lendable deposits into reserve assets that can’t be lent. The American Bankers Association and the Financial Services Forum said any legislative deal should protect “local lending to families and small businesses that drives economic growth.” That structural distinction over deposit form remains the key sticking point in negotiations.
The White House report arrives as the CLARITY Act remains deadlocked over the same stablecoin‑yield dispute that stalled the bill in January. Crypto.news has previously described how the bill is split among four factions, each with effective veto power over different provisions. Missing the Senate’s May window risks pushing the legislation into the midterm season, when the legislative calendar tightens and incentives to compromise change.
This analysis is the most significant development in the negotiations since the January collapse of the markup. Whether the CEA’s findings will be enough to pry open a Senate vote in May — and shift the balance between consumer benefits and bank concerns — is now the question the industry is watching most closely.
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