A White House report found banning stablecoin yield would add just 0.02% to bank lending. When Senators Tillis and Alsobrooks announced their stablecoin yield compromise on March 20, it was widely seen as a win for banks. Circle’s shares dropped 20% in its worst daily performance on record, Coinbase fell nearly 10%. However, a White House report that followed on April 8 blew the banks’ argument out of the water.
Published by the Council of Economic Advisers (CEA), the report claims that banning yield payments for exchanges and affiliates would only increase total bank lending by $2.1 billion – a measly 0.02% of outstanding loans. For community banks, which are considered to be the most vulnerable to the threat of deposit flight, the results are similar – around $500 million in additional lending capacity, or 0.026% increase. In other words, the yield prohibition that banks have been fighting tooth and nail for would bring very little benefit to banks, while clearly disadvantageing the consumer. This report is important because it debunks the argument that the US Treasury and the American Bankers Association have relied on for months in an attempt to ban stablecoin yields.
The Treasury Department had estimated that this increased competition could cause a whopping $6.6 trillion in bank deposit flight – a substantial chunk of the roughly $18 trillion total. Community banks, in particular, were considered to be under serious threat. Indeed, a compromise was nearly reached – one that would prohibit yield on passive holdings entirely, but leave a loophole open for activity-based rewards, the scope of which is yet to be defined. Even under the most aggressive assumptions—explosive stablecoin growth, major shift in Fed policy, and reserves being locked in cash rather than Treasuries—the yield ban would only produce around $531 billion in additional lending across the system, about 4.4% of 2025 Q4 loan volumes, with community banks seeing a best-case boost of roughly 6.7%.
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