White House Report: Stablecoin Yield Ban Aids Lending Little

White House economists have determined that prohibiting yields on stablecoins would result in only a negligible boost to traditional bank lending, according to a new analysis from the Council of Economic Advisers. The report, released Tuesday, challenges concerns raised by the banking sector over potential deposit shifts to cryptocurrency products.

The council's economic modeling projects that banning rewards on stablecoins would increase overall bank lending by about 2.1 billion dollars, representing just 0.02 percent of total loans. This modest gain would come at a net welfare cost of 800 million dollars to consumers, primarily through lost opportunities for competitive returns on holdings. Large national banks would capture roughly 76 percent of the additional lending, or 1.6 billion dollars, while community banks would see even smaller benefits: about 500 million dollars, or a 0.026 percent increase from current levels.

Even under extreme scenarios, such as the stablecoin market expanding sixfold, the council's authors estimated community banks would experience only a 6.7 percent lending increase, amounting to 129 billion dollars. The analysis emphasizes that most stablecoin...