The American Bankers Association (ABA) has issued a statement countering the report by the Council of Economic Advisers, part of the Trump White House, which recently stated that stablecoin yield does no harm to banks but, if banned, harms consumers’ ability to generate value from stablecoin holdings.
In the ABA Journal, the authors package their opposition as “studying the wrong question” and creating a “misleading sense of safety” if stablecoins are allowed to generate yield.
The ABA claims that “households and businesses have stronger incentives to move funds out of bank deposits and into stablecoins, unless Congress prohibits yield.” Yet this statement ignores that businesses and households have had better options for generating yield than many savings accounts for decades, and even so, many deposit holders leave funds in low-interest-bearing accounts due to intrinsic inertia.
Additionally, the ABA claims that stablecoins will grow rapidly, more so than what the CEA report was based on regarding yield.
This ignores that both small and large banks will be able to offer the same stablecoin services that approved stablecoin issuers may provide, given that yield is part of the equation.
The ABA worries:
“If deposits move from community banks to large institutions — or into stablecoin issuer accounts — credit availability can shrink in the places and sectors that rely most on relationship banking.”
This posturing is obtuse, as the only thing at risk is the spread banks earn on deposits held and loans originated, since all these banks would need to do is raise the rates paid on deposits to keep deposits stable or growing. This is about bank earnings fear, not stablecoin popularity.
The ABA declares:
“There is already ample evidence and analysis showing that a prohibition on yield for payment stablecoins is a prudent safeguard.”
This is erroneous in every respect.
A level playing field that allows stablecoin yield for all issuers is how competition works. Banks are using FUD in an attempt to create a regulatory moat, something the bank industry is good at, for a business they fear losing instead of adapting to the inevitable digital asset future of finance.