They argued that even if total deposits across the banking system stayed flat, money would shift from smaller community banks to larger institutions.
Crypto News
The American Bankers Association (ABA) has pushed back against a White House report that downplayed the threat stablecoin yields pose to the U.S. banking system, saying the analysis missed the point entirely.
The White House Council of Economic Advisers published a paper last week concluding that banning stablecoin yield payments would only increase bank lending by $2.1 billion, a net increase of roughly 0.02%. The ABA's chief economist, Sayee Srinivasan, and vice president for banking and economic research, Yikai Wang, said the Council asked the "wrong question."
The pair said the real concern is not what happens to bank lending if stablecoin yield is banned, but what happens to deposit flows if it is allowed. They argued that even if total deposits across the banking system stayed flat, money would shift from smaller community banks to larger institutions.
That redistribution would raise funding costs for smaller lenders, the ABA said, and some may not have enough balance sheet flexibility to absorb the outflows without turning to more expensive wholesale borrowing. The concern follows a Treasury Department paper from April 2025 that estimated widespread stablecoin adoption could drain as much as $6.6 trillion in deposits from the U.S. banking system.
Despite these objections, ABA researchers acknowledged that households and businesses would have a financial incentive to move funds toward higher-yielding stablecoins. Coinbase CEO Brian Armstrong has previously argued that stablecoin yield would force banks, which have paid near-zero interest on deposits for decades, to compete more directly with crypto products.
Members of the crypto and banking industries are currently negotiating terms in a Senate bill that would govern crypto oversight, with stablecoin yield payments remaining a central point of dispute ahead of a potential markup this month. The ABA counts JPMorgan Chase, Goldman Sachs, and Citigroup among its members.
Its intervention signals that the stablecoin yield debate is moving from academic modeling to active lobbying, with community bank vulnerability at the center of the argument.
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