Senate Bill Faces Delay Over Stablecoin Yield Debate

TLDR

• The American Bankers Association disputed the White House analysis on stablecoin risks.
• Bankers said policymakers must study a market where stablecoin yield remains allowed.
• Lawmakers drafted a compromise to restrict yield-like rewards on stablecoins.
• The Senate Banking Committee has not scheduled a hearing on the bill.
• Senator Cynthia Lummis called for urgent action to advance the legislation.

U.S. banking leaders have challenged a White House report that downplayed risks from stablecoins. They argue that stablecoin yield could draw deposits away from traditional banks. The dispute has stalled the Digital Asset Market Clarity Act in the Senate.

Bankers Dispute White House Findings on Stablecoin Yield

The American Bankers Association rejected a recent Council of Economic Advisers report. The group said the report examined the wrong policy scenario. It argued that economists should have studied a market where stablecoin yield remains permitted.

ABA economists wrote, “The CEA paper minimizes the core risk by starting from the wrong question.” They said a ban on yield for payment stablecoins would protect insured deposits. They also said such a rule would support stablecoins as payment tools rather than deposit substitutes.

Bankers warned that allowing yield could speed deposit migration. They said returns from stablecoins may exceed bank interest rates. They argued that customers would move funds to chase higher rewards.

The ABA estimated that stablecoin markets could grow from $300 billion to $2 trillion. It said yield would act as the main driver of that expansion. It added that growth at that scale would reshape deposit flows.

Senate Negotiations Stall Over Crypto Bill

Lawmakers have struggled to advance the Digital Asset Market Clarity Act. The bill seeks to set rules for U.S. crypto markets. However, disagreements over stablecoin yield have delayed committee action.

Senators from both parties considered bankers’ concerns about deposit flight. They discussed how depositors fund lending activities. They then drafted a compromise to limit certain reward structures.

The compromise would ban yield on holdings that resemble deposit accounts. It would allow activity-based rewards similar to credit card programs. Still, banks have not publicly endorsed the proposal.

Senator Cynthia Lummis urged action on the social media platform X. She wrote, “America needs Clarity.” She also said the time to move the bill forward is “now or never.”

The Senate Banking Committee has not scheduled a hearing. Lawmaker advocates had expected a session before the month’s end. As of this week, no official date appears on the calendar.

Bank representatives have kept a lower public profile. However, they continue to circulate policy papers and letters. They argue that early safeguards would limit systemic shifts.

The White House economists had said banks face limited risk. They examined a scenario where Congress bans yield. Bankers countered that lawmakers must assess a no-ban environment.

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