A White House-backed analysis has found that banning stablecoin yield would increase bank lending by just 0.02%, challenging key assumptions behind proposed crypto regulations.
The study, conducted by the Council of Economic Advisers, examined policies such as the GENIUS Act and concluded that stablecoin-related deposit outflows pose minimal risk to banking liquidity.
“Our model shows that this concern is quantitatively small. Most stablecoin reserves recirculate through the banking system as ordinary deposits,”
The report stated.
The analysis found that only around 12% of stablecoin reserves are held in bank deposits that could be constrained under stricter reserve requirements, limiting their impact on lending capacity.
Most reserves are instead invested in short-term Treasuries, which re-enter the banking system through dealer deposits, effectively preserving overall liquidity despite shifts in where funds are held.
Even where additional capacity exists, banks tend to retain liquidity buffers rather than expand lending, further reducing the real-world effect of any yield restrictions.
The report concluded that meaningful gains in lending or economic welfare would require highly unrealistic assumptions, suggesting limited policy benefits from banning stablecoin yields.