Banking lobbyists should take the win on the stablecoin yield ban

• Key insight: Banks should be content with the compromise over the stablecoin yield ban in the CLARITY Act.
• Supporting data: The White House Council of Economic Advisers released an analysis in April finding that a full yield ban would increase bank lending by just $2.1 billion, roughly two one-hundredths of one percent of the loan market.
• What's at stake: If CLARITY dies or gets pushed past the midterm window, the alternative is a rulemaking fight the banks will lose, while a multitrillion-dollar payments technology keeps building the rails around them.
  

The American Bankers Association is about to make one of the most consequential strategic errors a Washington trade group has made in years. The Senate Banking Committee voted out the Digital Asset Market CLARITY Act on a bipartisan basis, and now the stablecoin yield compromise that gave the banks most of what they asked for is ripe for them to take. All they have to do is let it pass. Instead, they are running a pressure campaign to blow it up.

Look at what the compromise actually does. Senator Thom Tillis and Senator Angela Alsobrooks spent months negotiating a stablecoin yield framework that prohibits issuers from paying interest on idle balances and restricts economically equivalent arrangements through affiliates. That was banks' central demand. They wanted a hard ban on passive yield so stablecoins would not function as interest-bearing deposit substitutes. They got it. Activity-based rewards, like loyalty promotions tied to spending or transactions, survive, which the White House explicitly endorsed.

By any reasonable measure, the banks won. And now they are trying to snatch defeat from the jaws of victory.

The empirical case for going further has collapsed. The White House Council of Economic Advisers released an analysis in April finding that a full yield ban would increase bank lending by just $2.1 billion, roughly two one-hundredths of one percent of the loan market. The consumer cost of the same full ban is about $800 million. Even academic estimates cited by the CEA suggest stablecoin growth would put only around 40 basis points of downward pressure on interest rates over a decade. Federal Reserve Governor Stephen Miran reached similar conclusions in a November speech, noting that stablecoin issuers' demand for Treasuries strengthens, rather than drains, the dollar financial system. The deposit-flight narrative the ABA has been selling is not supported by the people actually doing the math.

So, what is the real grievance? It is not hard to see. The banks collect roughly $187 billion a year in interchange and payment-processing fees, and stablecoin rails threaten that revenue line far more than they threaten deposits. When the ABA argues that a payment innovation endangers lending, it is worth asking which part of the bank income statement it is actually defending.

There is also a whiff of overcorrection in the current campaign. The trades missed the implications of stablecoins in the original GENIUS Act negotiations, and they seem determined to make up for it now by fighting on ground that has already shifted. That is how lobbying mistakes get compounded.

OCC

Stablecoin yield debate central in GENIUS rule comments

Public comments on the Office of the Comptroller of the Currency's GENIUS Act implementing regulations highlighted the rift between banks and crypto firms over the permissibility of yield on stablecoin holdings, an issue that has stalled crypto market structure legislation for months.

By Ebrima Santos Sanneh

May 6

Here is the part the ABA's leadership needs to think about. Suppose the pressure campaign works. Suppose CLARITY dies or gets pushed past the midterm window and into the legislative graveyard of 2027 and beyond. What happens next? The trades would be left with Treasury rulemaking under the GENIUS Act, which does not provide the statutory authority to reach rewards in the first place. The status quo gets worse for banks, not better. Meanwhile community banks, which are increasingly partnering with stablecoin issuers for real-time settlement and cheaper correspondent banking, will build those relationships with or without the ABA's permission.

The Senate Banking Committee chairman, Tim Scott, has led the bill through a successful markup and it is now barreling toward the Senate floor. Senator Tillis, free from the pressures of reelection, did the harder job of brokering a deal that crypto firms and banks could both live with. The White House, Treasury, the SEC and the CFTC have aligned behind the text. Every stakeholder that matters is ready to move.

The ABA should take the win. The yield ban on idle balances is real. The restrictions on economically equivalent structures are real. The alternative is a rulemaking fight the banks will lose, while a multitrillion-dollar payments technology keeps building the rails around them.

Take the win, or lose everything.