Bitcoin Magazine
White House Says Banning Stablecoin Yield Would Hurt Consumers More Than It Helps Banks
The federal government’s own economists at the White House have thrown cold water on one of the central justifications for restricting stablecoin returns — and their findings run counter to a provision already written into law.
The GENIUS Act, signed in July 2025, established the first comprehensive federal framework for stablecoins. The law requires issuers to hold reserves on a one-to-one basis — meaning every dollar in circulation is backed by a real dollar in safe assets like Treasury bills, cash, or money-market funds. It also contains a blunt prohibition: issuers cannot pay holders any form of yield or interest on their coins.
The logic, at least as its advocates have framed it, is straightforward. If stablecoins start paying rates competitive with savings accounts, households may move money out of bank deposits and into tokens. Banks would lose that funding and, in turn, lend less. Community banks — smaller institutions without Wall Street’s wholesale funding options — would take the hardest hit.
Some academic analyses put that lending contraction as high as $1.5 trillion. Those numbers circulated in congressional testimony and in the press. They shaped the debate.
The White House Council of Economic Advisers (CEA) built a model to test the claim, and the results are striking.
Simply put, “a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings.”
White House tests stablecoin yields
At current conditions, banning stablecoin yield would increase bank lending by just $2.1 billion — a 0.02% change against a $12 trillion loan book. The welfare math runs in the other direction: consumers would lose $800 million more in forgone returns than borrowers would gain from slightly lower rates.
The cost-benefit ratio the White House CEA calculated was 6.6 — meaning the policy costs more than six times what it delivers.
The reason the numbers are so small comes down to how stablecoin reserves actually move through the financial system. When a household converts dollars into stablecoins, the issuer doesn’t bury that money in a vault.
Most of it gets reinvested — in Treasury bills, repo agreements, and money-market funds. Those dollars flow back into the banking system through dealers and counterparties. The White House CEA traced three balance-sheet scenarios and found that in the most common cases, aggregate deposits across the banking system remain essentially unchanged. The money reshuffles; it doesn’t disappear.
The critical variable is what fraction of stablecoin reserves end up truly locked out of lending. The White House CEA calibrated that number — called theta in their model — at 12%, based on Circle’s December 2025 reserve report for USDC. Tether holds even less in bank deposits: $