Stablecoin yield ban: Minimal lending boost, consumer costs

Banning stablecoin yields would raise bank lending by just $2.1B (0.02%), mainly at large banks, while reducing consumer returns and offering little benefit to credit availability.

Recent studies, including a White House analysis, indicate that banning yields on stablecoins, as proposed by the GENIUS Act, would have only a minimal effect on bank lending. The ban requires stablecoin issuers to fully back their tokens with specified assets and prohibits them from offering interest or yield to holders. Analyses consistently estimate that removing stablecoin yields would increase bank lending by about $2.1 billion, representing just 0.02% of the total loan market. Most of this increase would occur at large banks. Additionally, funds used to purchase stablecoins are often reinvested in assets like Treasury bills or redeposited in banks, helping maintain overall deposit levels. While the ban may slightly boost lending, it results in a net welfare loss for consumers, who lose access to returns without a meaningful improvement in credit availability. The findings challenge claims that stablecoins threaten traditional bank lending and suggest the ban mainly imposes costs on stablecoin holders, potentially restricting competition and innovation in digital finance.