The latest crypto update from Washington reshaped the CLARITY Act debate on Wednesday when the White House Council of Economic Advisers published a 21-page analysis finding that banning stablecoin yield would increase bank lending by just 0.02 percent, directly undercutting the banking industry’s central argument for restricting the product.
Summary
- The CEA report finds that prohibiting stablecoin yield would boost traditional lending by approximately $2.1 billion, equal to 0.02 percent of total loans, with 76 percent of that benefit flowing to large banks rather than the community lenders whose protection has driven the banking lobby’s position
- A ban would produce a net welfare loss of $800 million, meaning consumer costs outweigh any benefit to the financial system; the report also warns that tightening the CLARITY Act’s yield language further would be counterproductive
- Coinbase CPO Faryar Shirzad welcomed the findings while the banking industry pushed back, calling the conclusions beside the point, and the Senate Banking Committee markup remains targeted for late April
The Bloomberg report on the CEA analysis landed as the CLARITY Act remained deadlocked over the same stablecoin yield dispute that has stalled it since January. The study uses a model calibrated with Federal Reserve and FDIC data on deposits, lending, and bank liquidity, alongside stablecoin industry disclosures and academic estimates of how consumers move funds between assets. Its core finding is that when consumers buy stablecoins, the funds are typically reinvested in Treasury bills and redeposited into the banking system, leaving aggregate deposit levels largely unchanged regardless of whether yield is permitted.
The report’s bluntest conclusion: “In short, a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings.”
The analysis hands crypto firms a White House-backed economic rebuttal to the banking lobby’s primary argument. The American Bankers Association has warned for months that stablecoins paying yield could drain deposits from community lenders, with the Independent Community Bankers of America estimating losses as high as $1.3 trillion. The CEA tested those numbers and found them implausible. Even under a scenario where the stablecoin market grew sixfold, reserves became unlendable, and the Federal Reserve abandoned its current framework, the lending boost from a ban would reach only 6.7 percent. The report describes those conditions as simultaneously implausible. Coinbase CPO Faryar Shirzad called the findings confirmation “that stablecoins aren’t a threat to community banks.”
What the Banking Industry Is Saying Back
Banking sources immediately pushed back, arguing the report underestimates how deposit outflows change the form in which funds return to banks, shifting them from lendable deposits into reserve assets that cannot be lent out. The American Bankers Association and Financial Services Forum said they want any legislative deal to support “the local lending to families and small businesses that drives economic growth.” That structural distinction between deposit forms, which the CEA model does not fully address, remains the contested ground in the negotiation.
What Comes Next Before the May Window Closes
As crypto.news has reported, the CLARITY Act is caught between four factions each with effective veto power over different parts of the bill. As crypto.news has noted, missing the May Senate window risks pushing the bill into midterm season, where the legislative calendar and Democratic incentives to cooperate both narrow sharply. The White House report is the most significant shift in the negotiation since the markup collapsed in January, and whether it unlocks a Senate vote by May is the question the industry is now watching closest.
