1 week ago
32
The White House Council of Economic Advisers published a report examining what happens to bank lending if the GENIUS Act’s prohibition on stablecoin yield holds, and the numbers are considerably less dramatic than banking lobbyists have suggested.
The CEA paired the report with an interactive model explorer, letting anyone adjust variables like stablecoin market share and household yield sensitivity to see projected outcomes in real time.
What the numbers actually say
The CEA’s core finding is that banning yield on payment stablecoins would increase total bank lending by roughly $2.1B, about 0.02% of total outstanding loans. For community banks specifically, the projected boost is $0.5B, or approximately 0.026% of their loan books.
The GENIUS Act, signed into law in July 2025, requires stablecoin issuers to maintain a 1:1 reserve in safe assets and bars them from paying any yield or interest to holders. The fear from banking groups is that without that prohibition, yield-bearing stablecoins could balloon into a $1-2 trillion market, pulling deposits out of local banks that depend on community funding to underwrite small business loans and mortgages.
The CEA’s model concedes that in a worst-case scenario where stablecoins capture roughly 10% of relevant market share, total additional lending could reach $531B, or 4.4% overall, with community banks seeing a $129B increase, about 6.7% of their portfolios.
The report estimates consumers lose around $800M annually in welfare from being denied yield on their stablecoin holdings. The CEA calculates a cost-benefit ratio of roughly 6.6:1 against the prohibition, meaning the consumer cost significantly outweighs the marginal lending benefit to banks.
Banking groups say the White House is asking the wrong question
The American Bankers Association and the Independent Community Bankers of America are not impressed. Both organizations argue the CEA is misframing the debate entirely.
Their concern is not about the current state of the stablecoin market. It is about the scaling trajectory. If yield-bearing stablecoins are eventually permitted and reach the $1-2 trillion range that some projections envision, community banks could face deposit outflows that meaningfully constrain their ability to lend locally.
The ICBA’s position reflects a broader anxiety among smaller lenders: community banks cannot compete with the federal government’s implicit backing of safe-asset reserves the way large institutions can. A stablecoin effectively backed by Treasury bills, offering competitive yield, is a product that most retail depositors would find attractive, and community banks have limited tools to match it.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
English (US) ·