WASHINGTON—The Trump White House is pushing back on one of the banking industry’s core arguments in the fight over stablecoin “rewards,” with presidential economists concluding that banning crypto exchanges and other intermediaries from paying yield on stablecoin balances would do little to preserve bank lending while leaving consumers worse off.
The new Council of Economic Advisers analysis landed Wednesday as Bloomberg Law and other outlets reported the Administration’s latest intervention in a dispute that has helped stall broader digital-asset legislation.
In its report, the White House said the gain to bank lending from a yield ban would be only about $2.1 billion, or 0.02%, and that community banks would account for roughly $500 million of that additional lending. The report also said a prohibition would carry a net welfare cost of $800 million, arguing that competitive returns on stablecoin holdings could benefit consumers more than a ban would help lenders.
That conclusion cuts directly against months of warnings from banks and credit unions, which have argued that the GENIUS Act’s ban on issuer-paid interest left a loophole by allowing affiliates, exchanges or other partners to offer rewards that function like yield. In January, America’s Credit Unions joined the ABA, ICBA, DCUC, Inclusiv and other groups in urging Congress to close that channel, warning that inducements tied to payment stablecoins could siphon deposits away from regulated institutions and weaken local lending.
As CUToday previously reported, the trade groups have framed the issue as a direct threat to deposit funded lending, and in March the debate was still intense enough that lawmakers were discussing possible compromise language to address what banks and credit unions called the stablecoin “loophole.” CUToday also reported earlier this year that the joint industry coalition warned trillions in deposits could be pulled from community banks and credit unions if rewards or yield-like payments were allowed to continue.
Supporters of tighter restrictions have pointed to outside estimates suggesting the risk could be far larger than the White House now says. The ABA Banking Journal, summarizing the new CEA report while noting the industry’s objections, said the Treasury Department has estimated that as much as $6.6 trillion in bank deposits could be at risk, while Reuters has separately reported on forecasts that stablecoins could pull hundreds of billions of dollars from U.S. banks over the next several years.
A 2025 Federal Reserve note likewise said substitution of retail deposits into stablecoins could raise banks’ funding costs and liquidity risks even if the effect on total deposits were limited.