White House Backs Stablecoin Rewards

A new report issued today by the White House Council of Economic Advisers (CEA) argues that banning interest or yield on stablecoins would do little to help banks, especially community banks, and could instead deprive consumers of better returns. The report comes amid a debate between banks and crypto firms: banks warn that yield-bearing stablecoins could pull deposits away from them, while crypto companies say restricting yields would stifle innovation.

According to the CEA’s analysis, delightfully titled “Effects of Stablecoin Yield Prohibition on Bank Lending,” even eliminating stablecoin yield would have only a minimal impact on bank lending—raising it by about $2.1 billion, or just 0.02%. Most of that benefit would go to large banks, not smaller community institutions. Even under extreme assumptions, the gains for community banks remain modest relative to their overall lending activity.

This stance contradicts the view of the Independent Community Bankers of America, which argues that allowing stablecoin yields could significantly drain deposits—potentially reducing community bank lending by hundreds of billions of dollars and harming small businesses and local economies.

As the study itself put it in its executive summary, “One rationale for prohibiting yield is that if stablecoins were to offer competitive returns, households may shift dollars out of traditional bank accounts and into tokens. Since stablecoin reserves are fully backed rather than fractionally lent, this could reduce bank lending.”