The White House Council of Economic Advisers (CEA) has released a report examining the potential impact of banning stablecoin yield on the U.S. banking system, concluding that such a policy would have only a limited effect on bank lending.
The report, titled “Effects of Stablecoin Yield Prohibition on Bank Lending,” analyzes provisions under the GENIUS Act, a law passed in July 2025 that requires stablecoin issuers to maintain one-to-one reserves backing their tokens and restricts them from paying interest or yield to holders.
Policymakers have raised concerns that if stablecoins offered competitive returns, consumers could move funds out of traditional bank deposits and into digital tokens.
Because stablecoins are typically backed by fully reserved assets rather than fractional lending, such a shift could theoretically reduce the amount of capital banks have available to extend loans.
However, the CEA report finds that the real-world impact is likely to be small. According to the study’s baseline model, eliminating stablecoin yield would increase bank lending by about $2.1 billion, representing roughly 0.02% of total U.S. bank lending.
Researchers explain that several factors significantly limit the policy’s effect. First, the current stablecoin market is relatively small compared with the overall banking system, with around $300 billion in circulation compared with more than $17 trillion in bank deposits.
Second, most stablecoin reserves are invested in assets such as short-term U.S. Treasury bills rather than bank deposits. This means the majority of funds entering stablecoins ultimately remain within the broader financial system instead of permanently leaving bank balance sheets.
The report also notes that banks tend to absorb deposit changes through liquidity buffers rather than immediately expanding or contracting lending activity. As a result, shifts between stablecoins and traditional deposits translate into relatively modest changes in credit supply.
The study further estimates that banning stablecoin yield could generate a net welfare loss of around $800 million annually, as consumers would lose the opportunity to earn competitive returns on digital dollar holdings.
Overall, the CEA concludes that concerns about stablecoins significantly weakening bank lending are likely overstated. While stablecoin adoption could influence financial markets at the margins, the report suggests its direct impact on traditional banking activity remains limited under current market conditions.
