White House finds stablecoin yield caps would only marginally increase bank lending

Consumers would face net welfare costs if the U.S. government banned stablecoin yields. The White House Council of Economic Advisers found that such a ban would increase bank lending by approximately $2.1 billion from a baseline scenario, representing about 0.02 percent of total loans. This assessment differs from warnings by the Independent Community Bankers of America, which claimed that interest-bearing stablecoins could lead to $1.3 trillion in deposit outflows and $850 billion in lending declines. The Council of Economic Advisers reported that most stablecoin reserves remain within the banking system as U.S. Treasuries or other deposits. The Council estimated that only 12 percent of total reserves cannot be linked to lending. Because funds moving into stablecoins reappear within the financial system, the Council concluded that a yield ban does little to protect bank lending while causing consumers to lose the competitive yields on stablecoin holdings.