Banking Industry Disputes White House Analysis on Stablecoin Interest Payments
The American Bankers Association warns that allowing interest-bearing stablecoins could trigger significant withdrawal of deposits from community banking institutions.
The American Bankers Association (ABA) has taken issue with a recent White House analysis suggesting that prohibiting yields on stablecoins would result in minimal effects on the banking sector, contending that researchers posed the "wrong question" in their investigation.
In a research document published Wednesday by the White House's Council of Economic Advisers, titled "Effects of Stablecoin Yield Prohibition on Bank Lending," analysts concluded that under standard assumptions, implementing a ban on stablecoin yield could result in just $2.1 billion in additional bank lending, which translates to a modest net growth of approximately 0.02%.
In a Monday statement, ABA chief economist Sayee Srinivasan along with vice president for banking and economic research Yikai Wang contended that the "live policy concern" centers not on how banning stablecoin yields might affect lending activities from banks, but rather on how permitting such yields could drive deposit withdrawals, especially from community banking institutions.
According to Srinivasan and Wang, even in scenarios where aggregate deposits across the banking sector stay constant, a greater volume of capital would probably shift away from smaller banking entities toward larger financial institutions, thereby increasing funding expenses for community banks and diminishing their capacity for local lending activities.
The duo noted that certain smaller banking institutions may lack sufficient balance sheet capacity to manage such outflows without turning to more expensive wholesale borrowing alternatives.
Representatives from both the cryptocurrency sector and traditional banking industry have convened for discussions to work out details in a Senate legislative proposal that would establish regulatory frameworks for cryptocurrency oversight in advance of a possible markup session this month, with provisions concerning the prohibition of stablecoin yield distributions emerging as a central point of disagreement.
The concerns raised by the ABA align with findings from a Treasury paper released in April 2025 that projected broad-based stablecoin adoption might result in deposit outflows totaling $6.6 trillion from the US banking system.
ABA admits stablecoin rewards are more attractive
Notwithstanding these apprehensions, the economic researchers from the ABA conceded that both households and business entities would face financial incentives to transfer their funds away from traditional banks in favor of higher-yielding stablecoin options.
Brian Armstrong, CEO of Coinbase, stands among prominent cryptocurrency industry figures who have publicly criticized traditional banks for offering virtually zero interest on customer deposits over many years, contending that stablecoin yields would compel banks to engage in more equitable competitive practices.
The ABA serves as the representative body for some of the most prominent institutions in the banking sector, including JPMorgan Chase, Goldman Sachs and Citigroup.