A White House analysis has challenged banking industry arguments for tighter restrictions on stablecoin yield, finding that a ban on interest-like payments would deliver only a marginal increase in bank lending while imposing a net welfare cost on consumers.
The Council of Economic Advisers report, released on 8 Apr, estimated that eliminating stablecoin yield would boost total bank lending by just $2.1bn, or roughly 0.02%. It would also create an annual welfare loss of approximately $800mn by denying holders competitive returns on their balances.
The conclusions come from the same administration that has aggressively championed digital assets, with President Trump signing the GENIUS Act into law in July 2025 and repeatedly criticizing banks for attempting to undermine the crypto agenda.
Yield debate intensifies
The GENIUS Act requires full reserve backing for stablecoins and prohibits issuers from paying yield directly to holders. Banking groups have pressed for broader restrictions, warning that any form of yield – whether direct or through affiliates and exchanges – could divert deposits away from traditional banks and limit lending capacity.
The CEA report disputes the scale of that risk. Under baseline assumptions, the lending impact stays negligible. Even in an extreme scenario, with the stablecoin market growing sixfold, reserves locked in unlendable cash, and the Federal Reserve altering its monetary framework, aggregate bank lending would rise by only $531bn, or 4.4% of total loans. Community bank lending would increase by $129bn, or 6.7%, under those implausible conditions.
"In short, a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings," the report stated. The authors added that the conditions needed for any positive net welfare effect from a ban are equally unrealistic.
Political stakes rise
Stablecoins have grown into a major component of the financial system, with total circulation surpassing $315bn as of early April 2026. Tether’s USDT accounts for roughly $184bn while Circle’s USDC stands at about $78bn. The assets facilitate tens of trillions of dollars in annual transaction volume across payments, trading, remittances, and institutional treasury management.
The CEA findings align with the administration’s pro-crypto stance. President Trump has publicly sided with the industry in its clash with banks, posting that the GENIUS Act "is being threatened and undermined by the Banks" and that restrictions should not hold back the CLARITY Act. Some drafts of the CLARITY Act seek to close perceived loopholes allowing indirect yield through affiliates or decentralized structures, yet the report suggests such measures would offer limited protection for bank lending.
Crypto firms and supportive policymakers argue that overly restrictive rules would weaken stablecoins’ competitiveness as digital cash equivalents. Senate Banking Committee discussions have targeted a markup in the second half of April, though the yield issue continues to complicate broader negotiations.
Broader implications
Market reactions have already materialized. Circle, issuer of the USDC stablecoin with roughly $75bn in circulation, derives the majority of its revenue from interest on reserve assets. Its shares experienced sharp volatility earlier in 2026 amid shifting signals on yield restrictions.
The report stresses how even substantial shifts of funds from stablecoins into bank deposits would translate into only modest lending gains once reserve requirements and liquidity buffers are considered. Large banks would capture the bulk of any small baseline increase, with community banks benefiting far less proportionally.
By quantifying the limited upside for lenders alongside the tangible downside for consumers, the CEA provides fresh data for ongoing Washington debates. As stablecoin adoption accelerates – with some projections pointing toward $1tn in circulation by late 2026 – the regulatory approach to yield could significantly influence the sector’s long-term trajectory and the United States’ position in global digital finance.
