ABA: White House study ignored stablecoin deposit flight risk

The American Bankers Association criticized a White House Council of Economic Advisers report for not addressing the risk that yield-paying stablecoins could draw deposits away from community banks. The ABA made the comments in the ABA Banking Journal, arguing the CEA examined a narrow scenario rather than the effects of rapid stablecoin adoption.

The CEA estimated that prohibiting yield on payment stablecoins would increase total bank lending by about $2.1 billion, roughly 0.02% of all loans. The report also estimated consumers would lose about $800 million a year in forgone returns if yield were banned.

The ABA rejected that framing and called for analysis of scenarios in which yield-bearing stablecoins scale quickly and attract retail deposits. The banking group said stablecoins backed by Treasury securities and offering competitive returns could pull cheap deposits from smaller banks, raising those banks’ funding costs and reducing their ability to lend to small businesses, farmers and homebuyers. The Treasury Department has previously estimated as much as $6.6 trillion in deposits could be at risk if private digital cash-like instruments scale widely.

“The CEA studied the wrong question,” the ABA wrote. “By focusing on the effects of a prohibition, the CEA paper risks creating a misleading sense of safety by avoiding the much more consequential scenario: yield-paying payment stablecoins scaling quickly.”

The dispute over stablecoin yield arrives as the Senate returns from recess with a narrow window to advance the Digital Asset Market CLARITY Act. Yield on payment stablecoins remains the main unresolved issue in the bill. Treasury Secretary Scott Bessent has urged passage, and officials at both the SEC and the CFTC have said their agencies are ready to implement the legislation if it becomes law.

Senator Cynthia Lummis warned that if the Senate Banking Committee does not mark up the bill by late April, federal action on digital assets could be delayed for years and the legislation is unlikely to return before the November midterm elections. ABA and other banking representatives have urged that policymaking include models of deposit migration and long-term market dynamics rather than only near-term effects of a prohibition.