White House CEA: Banning stablecoin yields will have little to no impact on community banks; USDC rewards can still be profitable

Gate News, the White House Council of Economic Advisers (CEA) said in a report released Wednesday that restrictions on crypto firms providing customers with stablecoin yield are having a negligible impact on community banks. It projects that traditional lending business will rise only slightly by 0.02%, or about $2.1 billion, and that most of the benefits will flow to large banks rather than community lending institutions. The report said such bans are almost ineffective at protecting bank lending, while also depriving consumers of the opportunity to earn competitive returns through stablecoins.

This conclusion differs significantly from the views of the American Independent Community Bankers Association. The association warned that if stablecoins are allowed to pay interest, small banks could face risks of up to $1.3 trillion in deposit outflows and $850 billion in loan losses. Stablecoins are typically pegged to the U.S. dollar on a 1:1 basis. Under a law related to stablecoins that Trump signed in July this year, issuers are barred from paying interest, but it does not restrict third-party partners from offering rewards—for example, some USDC holders can receive roughly 3.5% in returns.

The White House report emphasized that banning stablecoin rewards has limited welfare effects, and could instead hinder consumers from accessing higher-yield options. This stance highlights ongoing friction between the crypto industry and the banking industry. The Clarity Act had proposed closing the reward loophole—either banning third-party-provided yields or legalizing them—but the bill has been left on hold for a long time due to disputes between both sides. The CEA report released this time aims to provide a basis for legislative and policy negotiations, while also reflecting the government’s efforts to find a balance between stablecoin regulation and financial innovation.

This development could have potential impacts on both crypto and traditional banking markets. Investors may watch changes in stablecoin yield policies, community bank deposit flows, and the investment returns of holders of crypto assets. Regulatory and legislative progress could directly affect the market attractiveness and liquidity of major stablecoins such as USDC and USDT. (Bloomberg)