The U.S. banking industry responds positively to the White House's stablecoin report—"The problem itself is incorrect"

The U.S. banking industry has publicly pushed back on the White House research about stablecoin yield(yield). The controversy has gone beyond simply interpreting data and has evolved into a fundamental fight over the core framework that will determine the direction of U.S. stablecoin legislation and the future of regional financial ecosystems.

■ White House CEA Report: “Banning Yields Has Minimal Effect”

On April 8, the White House Council of Economic Advisers(CEA) released a 21-page analytical report. The report’s conclusion is clear: banning stablecoin yields would only increase bank loans by about $2.1 billion, which is 0.02% of the total $12 trillion in loans. Of that, the share for regional banks (with assets below $100 billion) is only $500 million.

The report also analyzes that the ban would cause consumers to give up about $800 million in earnings, with a cost-benefit ratio as high as 6.6—meaning the cost of banning yields far exceeds the benefits.

The analysis is based on the “reshuffling(reshuffling)” logic: because stablecoin issuers reinvest their reserves into U.S. Treasuries, repurchase agreements, money market funds, and the like, even if consumers transfer funds to stablecoins, the funds will ultimately flow back to the banking system. The report argues that, given the banking industry’s current holdings of more than $1.1 trillion in excess liquidity, from a system-wide perspective there would be almost no loan constraint.

■ ABA Counterattack: “The Right Answer to the Wrong Question”

The American Bankers Association(ABA) Chief Economist Sai Srinivasan and Deputy Head of Banking and Economic Research Ikei Wang immediately issued a rebuttal. Their core point is: “From the outset, the CEA report posed the wrong question, downplaying the core risks.”

ABA emphasizes that the real point of contention in policy is not whether “banning yields affects loans,” but whether “allowing yields will accelerate deposit outflows.” In particular, the scenario in which funds flow out of regional banks—leading to higher bank funding costs and a contraction of regional lending—is the real threat.

Based on related state-level analysis, ABA estimates that if the stablecoin market grows from the current roughly $300 billion to $1 trillion to $2 trillion, then in Iowa alone it could reduce loans by $4.4 billion to $8.7 billion.

■ Core Conflict Point: Aggregate Statistics vs. Individual Institution Reality

In the end, both sides’ arguments come down to differences in their perspective framework: whether to look at the “entire system” or to look at “individual institutions.”

The White House stresses that even if funds flow into stablecoins, the reserves will return to the banking system again through channels such as U.S. Treasuries from a macro trend standpoint. ABA, however, points out that this “reflow” will not go to regional banks that are experiencing deposit outflows, but instead will concentrate in large financial institutions or money market markets. Regional banks would then have to rely on wholesale funding to replace lost deposits, which will lead to higher funding costs → higher loan interest rates → shrinking credit for small and medium-sized enterprises, farmers, and households.

■ Dispute Over the GENIUS Act and the “CLARITY Act Loophole”

The backdrop to this debate is the GENIUS Act, which took effect in July 2025. The GENIUS Act prohibits payment-type stablecoin issuers from directly paying interest, but there is a loophole: it does not explicitly prohibit yield distribution through third-party platforms.

Coinbase’s USDC rewards are a typical example. By sharing reserve earnings with users, it provides yields close to those of high-yield savings accounts. ABA argues that this structure effectively undermines the legislative intent of banning yields, and believes that the currently discussed CLARITY Act amendment should clearly close this channel.

FDIC has also joined this trend. It has proposed a set of regulations to implement the GENIUS Act and is pushing to amend deposit insurance rules to ensure that payment-type stablecoins do not fall under deposit insurance.

■ The Deeper Issue: Concerns About the “Narrow Bank(Narrow Bank)”

Behind the debate lies a more fundamental problem of financial structure. It is the concern that yield-bearing stablecoins effectively play the role of a “narrow bank,” pulling funds away from the traditional credit intermediation function.

The White House believes that as long as reserves remain in ultra-safe assets such as U.S. Treasuries, a narrow-bank-like structure could actually be beneficial for payment safety. ABA, meanwhile, cites a precedent in Congress in which it was unwilling to approve CBDC (central bank digital currency) for similar reasons, rebutting that allowing this model without safeguards for the functions of community banks lacks consistency.

In addition, more than 80% of stablecoin transactions are conducted offshore, and the size of U.S. Treasuries held by some issuers has already exceeded that of certain national governments—these situations are also seen as part of the backdrop to this debate. This suggests that the yield dispute is intertwined not only with stablecoin design, but also with geopolitical variables such as U.S. Treasury demand and fiscal costs.

■ Implications for the Korean Market

This debate is not simply an internal U.S. policy dispute. South Korea is also facing similar policy choices: moving forward with legislation for Korean won stablecoins (such as KRWQ, etc.) and building a token securities market. Should stablecoins remain as “payment instruments,” or should they be allowed to evolve into “yield-bearing financial products”—the U.S. answer to this question may also become an important precedent for South Korea’s legislative direction.

In particular, ABA’s argument that yield-bearing stablecoins could threaten the deposit base of everyday financial institutions such as credit unions and savings banks also applies to local banks and the mutual finance ecosystem in South Korea. This is exactly why regulators need to closely watch the reasons behind this U.S.-U.S. debate.