Stablecoin Rewards Pose Minimal Bank Risk

Stablecoin Yield Prohibition’s Limited Impact on Bank Lending

• The White House Council of Economic Advisers (CEA) report states that prohibiting stablecoin yields poses minimal risk to the banking sector.
• Converting dollars into stablecoins typically keeps funds within the financial system, often reinvested in Treasury bills.
• Eliminating stablecoin yield would increase bank lending by only $2.1 billion, a negligible 0.02% rise in total lending.
• This policy could result in an estimated $800 million loss in consumer welfare due to reduced competitive returns.
• Lending gains from such prohibition would primarily benefit large banks, capturing approximately 76% of the additional lending capacity.

The CEA report indicates that prohibiting stablecoin yields offers minimal benefits to bank lending while imposing significant costs on consumers by reducing competitive returns on stablecoin holdings.