U.S. banks have come into a direct clash with the White House over whether to allow stablecoins to pay interest. They worry that adding interest to payment stablecoins could pull funds out of the banking system and shake local financial foundations.

BeInCrypto, a blockchain outlet, reported on April 13 that the American Bankers Association (ABA) publicly rebutted a report by the White House Council of Economic Advisers (CEA). It said the CEA analysed only the effects of keeping an interest ban, while overlooking the impact if interest-bearing stablecoins spread rapidly.

The dispute centres on how much bank deposits could leave if interest is allowed on payment stablecoins. The CEA estimated that keeping the interest ban would increase total bank lending by about $2.1 billion, or 0.02 percent of the total. It also said consumers would lose about $800 million a year in interest income opportunities.

The ABA countered that the report rests on the wrong premise. It said the analysis should assume a scenario in which interest-paying stablecoins grow at scale, rather than focus on the effects of a ban. It warned that if stablecoins backed by U.S. Treasuries spread while offering competitive yields, they could quickly absorb low-cost deposits at regional banks.

The ABA said such fund flows could raise banks' funding costs and ultimately lead to reduced local lending to small businesses, farms and homebuyers. The U.S. Treasury (USDT) has also previously estimated that deposits of up to $6.6 trillion could be exposed to risk. The ABA criticised the CEA report through its own media, saying it could give a false signal of safety by turning away from the more serious scenario of rapid spread of interest-bearing payment stablecoins.

The dispute is also tied to the U.S. Congress's legislative schedule. As the U.S. Senate returns from recess, discussion is set to resume on the CLARITY Act to regulate digital asset market structure, but the deadline for passage is tight. Treasury Secretary Scott Bessent has publicly urged passage, and SEC Chairman Paul Atkins and CFTC Chairman Mike Selig have said they are ready to enforce it immediately if it passes.

Some in the Senate have also raised concerns that failure to pass it in the current session could significantly delay legislation. Senator Cynthia Lummis warned it could be delayed by as much as 4 years, to after 2030, if it does not pass now.

If the Senate Banking Committee fails to review the bill by late April, it is likely to be difficult to take it up again before the November midterm elections. As a result, whether to allow stablecoins to pay interest is emerging as a key issue that could shape bank deposits, local lending and regulation of the digital asset market at the same time.