Daijiworld Media Network - Washington
Washington, Apr 9: A new economic analysis from the Council of Economic Advisers has cast doubt on claims that restricting returns on stablecoins would significantly boost traditional bank lending.
The study found that banning yield on stablecoins would increase lending by only about $2.1 billion—roughly 0.02%—while creating an estimated net welfare loss of $800 million. These findings challenge arguments from banks that such measures are necessary to protect deposit flows and sustain lending activity.
The report comes amid ongoing regulatory changes under the GENIUS Act, enacted in July 2025. The law mandates that stablecoin issuers maintain full one-to-one reserves and prohibits them from offering direct interest payments to users.
According to the study, concerns that attractive returns on stablecoins could drain deposits from banks—and thereby reduce lending—appear overstated. The analysis suggests that even if funds shift back into traditional banking systems, only a small fraction would translate into increased loans.
Researchers estimate that a yield ban could redirect around $54 billion into conventional bank deposits. However, the broader effect on credit expansion remains minimal, largely because stablecoin reserves are already invested in financial instruments like Treasury bills that indirectly circulate within the banking system. Only about 12% of these reserves are held in bank deposits that cannot be used for lending.
Even under extreme modeling scenarios, the projected increase in lending reaches about $531 billion, or 4.4%—a figure the report still characterizes as limited given the assumptions involved.
Smaller financial institutions are also unlikely to see major benefits. The study indicates that community banks would account for roughly 24% of any lending increase, translating to about $500 million, or a marginal 0.026% rise.
Overall, the report concludes that restricting stablecoin yields offers little advantage in strengthening bank lending, while potentially depriving consumers of more competitive returns available through digital financial products.
These findings may influence ongoing policy debates in Congress, particularly around proposals like the CLARITY Act, which could expand restrictions on stablecoin usage and returns.
Stablecoins—cryptocurrencies typically pegged to the US dollar—have seen rapid global adoption, especially for payments and savings. The market for these digital assets is currently valued at approximately $300 billion.