White House research found the provision of stablecoin yields is unlikely to significantly undermine bank lending and overall credit conditions.

On April 8 local time, blockchain outlet The Block Crypto reported that the White House Council of Economic Advisers assessed that even if stablecoin yields are limited, the effect accruing to banks would be limited.

A new report from the council said banning stablecoin yields would increase bank lending by about $2.1 billion from a baseline scenario. That is about 0.02 percent of total loans. It also said there would be net welfare costs for consumers.

The report differs from financial industry concerns that large-scale bank deposits could flow out if stablecoins offer competitive yields. The U.S. Congress is discussing rules related to stablecoins and is reviewing whether to block even indirect ways of providing yields, such as reward programs through intermediaries rather than issuers. In the process, banks have called for stronger regulatory language.

The Independent Community Bankers of America has warned that allowing interest-bearing stablecoins could lead to as much as $1.3 trillion in deposit outflows and a $850 billion decline in lending. Banking figures, including executives at Bank of America and JPMorgan, have also argued that stablecoin yields should be subject to regulation similar to banks. They see stablecoins as potentially becoming a parallel system that competes directly for deposits if there is no traditional supervision.

The council viewed the funding flow structure differently. It pointed out that most stablecoin reserves still exist within the banking system, with a significant share re-entering as U.S. Treasuries or other forms of deposits. As a result, it said the actual amount of funds leaving traditional financial institutions' balance sheets for stablecoins would be limited.

The council estimated that the share of total reserves that cannot actually be linked to lending is only about 12 percent. It said that even if user funds move into stablecoins, the dollars reappear within the financial system, easing the shock to credit creation. The report said, "A yield ban does little to protect bank lending, and instead causes consumers to give up the benefits of competitive yields on stablecoin holdings."

The debate over stablecoin yields is emerging as a key issue as U.S. legislative work accelerates. Regulators have already begun implementing provisions under the GENIUS Act enacted last year. The law requires one-to-one reserves and prohibits issuers from directly paying yields.

Separately, the Federal Deposit Insurance Corp has proposed a new framework to oversee stablecoin issuers. The industry sees negotiations over the CLARITY Act as nearing the final stage. Against that backdrop, the research could influence discussions over how effective limits on stablecoin yields are in protecting banks and what balance should be struck with consumer benefits.