Banning stablecoin yields barely boosts bank credit

• Banning interest would add USD 2.1 billion in loans, 0.02% of total banking.
• The measure would represent an annual negative welfare cost of USD 800 million for users.

The White House Council of Economic Advisers (CEA) determined that banning interest payments to stablecoin holders would have an insignificant effect on the volume of bank loans.

In an update to its research published on September 15, 2026, the agency assessed the justifications behind restrictive regulations, concluding that the economic costs of implementing such a ban would outweigh the supposed credit benefits by a ratio of 6.6 to 1.

The regulatory debate is based on the GENIUS Act, enacted in July 2025. This legislation requires stablecoin issuers to have a one-to-one backing in specific reserve assets and prohibits offering direct yields.

Since the law left a legal gap regarding interest-bearing products offered by third parties or subsidiaries, complementary proposals such as the Clarity Act (which was recently rejected for a vote in the Senate, as reported by CriptoNoticias) aim to definitively close this avenue.

The traditional banking sector argues that if stablecoins offer competitive returns, users will withdraw their funds from conventional accounts, reducing the system's capacity to grant commercial and personal loans.

However, the CEA's analysis debunks the premise of a mechanical destruction of capital. According to the document, when a user acquires a regulated stablecoin, the original deposit does not disappear from the financial system.

The rights to the funds are transferred to whoever sells the reserve asset to the issuer, such as Treasury bills, or remain as a bank deposit in the name of the custodian entity. Thus, the funds change institutions or holders but do not evaporate from the commercial circuit.

Under the base calibration of the government model, where the current stablecoin market represents 1.7% of deposits, eliminating interest payments would add only USD 2.1 billion in additional loans. This figure corresponds to an increase of 0.02% in total bank credits. For community banks, the projected increase is USD 500 million, or 0.026% of their portfolio.

Conversely, the measure would represent a negative welfare cost of USD 800 million annually, functioning as an indirect tax that forces users to shift their portfolios to less attractive deposits without providing substantial benefits to credit issuance.

Various organizations, such as the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA), have questioned the report.

Bankers argue that the CEA underestimates the potential growth of stablecoins and the impact on regional entities.

There are estimates from banking associations, such as the one led by Andrew Nigrinis from the Consumer Bankers Association, projecting credit contractions of up to USD 1.5 trillion. These positions align with the pressure exerted by banks during the first quarter of 2026, when they demanded that the CLARITY Act impose fines of up to USD 500,000 per day on those paying interest on inactive balances.

The CEA refuted the extreme contraction estimates, stating that to reach such levels, four unlikely scenarios must occur simultaneously. It would require the stablecoin market to multiply sixfold to represent 10% of deposits, that issuers maintain 100% of their reserves immobilized in bank cash, that user sensitivity to yield reaches historical peaks, and that the Federal Reserve abandons its current broad reserve framework.

In operational reality, the CEA clarifies that the issuing firm Circle maintains only 12% of its reserves in cash, while Tether records percentages close to zero.

The continuation of negotiations around the Clarity Act exposes a central dispute between protecting the traditional business model of banks and the possibility for users to earn returns on their digital assets.

If a total ban driven by the banking sector is implemented, official data projects that the regulation will limit the financial options of the public without achieving a significant impact on operational liquidity or the lending capacity of institutions.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.