A White House report meant to ease crypto legislation could make it harder by deepening bank resistance

Small banks are expected to reject the White House’s assessment that banning yield on stablecoins would have minimal impact on bank lending, maintaining their opposition to pending crypto legislation. The White House Council of Economic Advisers recently released a report concluding that eliminating stablecoin yield would boost bank lending by $2.1 billion — a 0.02 percent increase in total loans. That effect, the report stated, would remain negligible unless stablecoins grow sixfold, reserves shift entirely to segregated custody, and the Federal Reserve abandons its current ample-reserves framework. The finding aligns more with the crypto industry’s view than with banks’ warnings of massive deposit flight. TD Cowen analysts say small banks are likely to dispute both the assumptions and conclusions, continuing to treat stablecoins as a threat to their deposit base. As long as that perception holds, they will resist any crypto bill, including the CLARITY Act, that does not explicitly ban yield. Jaret Seiberg of TD Cowen’s Washington Research Group adds that the report may signal presidential openness to allowing stablecoin yield — making even narrow compromises, such as permitting yield for usage but not holding, harder to advance. With no final legislative text yet released and consensus elusive, the odds of passing a crypto bill this year stand at about one-third. If Congress fails to act, passage could be delayed until 2027, with final rules not taking effect until 2029.