A White House report found banning stablecoin yield would add just 0.02% to bank lending. Nic Puckrin explains why the banks’ core argument just collapsed.
By Nic Puckrin, CEO and co-founder of Coin Bureau.
The intelligence layer for fintech professionals who think for themselves.
Primary source intelligence. Original analysis. Contributed pieces from the people defining the industry.
Trusted by professionals at JP Morgan, Coinbase, BlackRock, Klarna and more.
Join the FinTech Weekly Clarity Circle →
When Senators Tillis and Alsobrooks announced their stablecoin yield compromise on March 20, it was widely seen as a win for banks. Circle’s shares dropped 20% in its worst daily performance on record, Coinbase fell nearly 10%. Crypto insiders were, reportedly, “cringing” at the news that passive yield on stablecoins would, most likely, be banned.
However, a White House report that followed on April 8 blew the banks’ argument out of the water. Published by the Council of Economic Advisers (CEA), the report claims that banning yield payments for exchanges and affiliates would only increase total bank lending by $2.1 billion – a measly 0.02% of outstanding loans.
For community banks, which are considered to be the most vulnerable to the threat of deposit flight, the results are similar – around $500 million in additional lending capacity, or 0.026% increase. In other words, the yield prohibition that banks have been fighting tooth and nail for would bring very little benefit to banks, while clearly disadvantageing the consumer.
Fear-mongering
This report is important because it debunks the argument that the US Treasury and the American Bankers Association have relied on for months in an attempt to ban stablecoin yields. The Treasury Department had estimated that this increased competition could cause a whopping $6.6 trillion in bank deposit flight – a substantial chunk of the roughly $18 trillion total. Community banks, in particular, were considered to be under serious threat.
And this argument worked. The figure seemed substantial. Fears escalated. Behind closed doors, the discussions around the Clarity Act have been going around in circles. Indeed, a compromise was nearly reached – one that would prohibit yield on passive holdings entirely, but leave a loophole open for activity-based rewards, the scope of which is yet to be defined.
This latest CEA report throws all of this into question. Even under the most aggressive assumptions – meaning explosive stablecoin growth, major shift in Fed policy, and reserves being locked in cash rather than Treasuries – the yield ban would only produce additional lending across the entire system of around $531 billion, or just 4.4% of 2025 Q4 loan volumes. For community banks, even that implausible best-case scenario produces a 6.7% boost. The numbers, in other words, don’t support the rhetoric.
Fresh ammunition
The CEA report hands crypto and fintech advocates fresh ammunition at a moment when it matters most. The Clarity Act still faces five sequential hurdles before it reaches the President’s desk: a Senate Banking Committee markup now targeted for the second half of April, a full Senate floor vote requiring 60 votes, reconciliation with the Agriculture Committee version, reconciliation with the House-passed version from July 2025, and a presidential signature.
Senator Moreno said that missing the May window risks pushing comprehensive crypto legislation off the calendar until after the November midterms. And getting stuck in limbo is, admittedly, a major risk. Total stablecoin growth has slowed down meaningfully this quarter, and this uncertainty has likely been a major factor. However, for the first time since these negotiations started, the crypto industry has a chance to get what it wants, and its insiders are now unlikely to give up easily.
At the time of the Tillis-Alsobrooks deal, Senator Lummis’s office called the negotiations “99% resolved”. But the CEA report may now reopen that last 1% chance of getting a more favorable outcome. After all, many in the industry were disappointed with the proposed compromise, criticising the “economic equivalence” standard for being vague and potentially more restrictive than the deal implied. Even with the clock ticking, the yield fight is back on.
Where we go from here
For exchanges and fintechs, the strategic direction hasn’t changed, but the regulatory ceiling may be higher than it looked three weeks ago. This could mean that, even if yields on idle deposits are banned, activity-based rewards gain a broad definition. Because much of the outcome hinges on how the SEC, CFTC and Treasury define “permissible rewards” in the twelve months after enactment.
While negotiations continue, the industry will likely be doubling down on transaction-linked incentives, cashback programs, and loyalty tiers tied to platform engagement. And that’s not a bad thing. It will likely lead to more inventive products and service providers working harder to retain clients, which could ultimately be a benefit for the end consumer.
The economic environment, meanwhile, is unlikely to benefit bank deposits, regardless of the outcome of the Clarity Act negotiations. With oil prices skyrocketing, inflation on the rise, and little support for risk assets, savers will be looking for the lowest-risk ways to preserve their wealth. Savings accounts paying an average of 0.39% are not that.
The CEA report has called the outcome of the stablecoin yield negotiations into question. But in the long term, it doesn’t really matter if the banks win that battle. They may well still be losing the war.