A White House report released Wednesday directly challenges the banking industry’s claims that the stablecoin dividend would drain deposits and weaken lending to households and small businesses.
Instead, banning these stablecoin rewards would have only a negligible impact on credit creation, found the analysis released by the Council of Economic Advisers (CEA).
The White House economists behind the 21-page report said their findings are based on a stylized economic model calibrated with Federal Reserve and FDIC data on deposits, loans and bank liquidity, as well as industry disclosures about stablecoin reserves and academic estimates of how consumers move funds between assets.
The report, which specifically analyzes the GENIUS Act signed into law in July 2025, also warns that proposed updates to the Digital Asset Market Clarity Act to further limit “return-like” rewards from intermediaries like Coinbase could be counterproductive.
“In short, a yield ban would do very little to protect bank lending while forgoing consumer benefits of competitive yields on stablecoin holdings,” the report stressed. It added that “the conditions for finding a positive welfare effect from banning dividends are simply implausible.”
The report marks the latest development in the ongoing conflict between US banks and the cryptocurrency industry that has stalled digital asset legislation in Congress, with senators seeking a compromise to unlock the stalled Clarity Act. President Donald Trump and his advisers have been eager for negotiators — including the crypto industry, bankers and senators from both sides of the aisle — to strike a deal that advances the long-awaited bill, one of the administration’s legislative priorities.
While the crypto firms and their legislative supporters argue that they should be allowed to offer dividend-like rewards on stablecoins, banks warn that this would lead to funds being siphoned away from the traditional financial system. But Wednesday’s findings could undermine a core argument from banking groups: Even a complete ban on stablecoin dividends would only marginally increase lending.
Ban does little to protect lending
In other words, the report argued, the ban would do little to protect lending while depriving consumers of competitive returns.
The American Bankers Association (ABA) insists that if stablecoins start offering returns comparable to high-yield savings accounts, depositors will move money out of banks and into digital dollars, reducing the funds banks use to make loans. Bank lobbyists have argued that community bankers will be particularly hurt — an argument that caught the ears of lawmakers like Sens. Thom Tillis, a Republican, and Angela Alsobrooks, a Democrat, who have sought a legislative compromise that would not hurt Main Street institutions.
But White House economists said the banks’ argument misunderstands how stablecoins interact with the broader financial system. In one example, the report describes how funds used to buy stablecoins are often reinvested in Treasury bills and ultimately re-deposited in other banks, leaving the overall level of deposits largely unchanged,
The report also addresses concerns that community banks could lose out as funds flow into treasuries and large institutions, finding that the impact on smaller lenders is limited. It estimates that community banks would only account for 24% of any incremental lending under a yield ban, or about $500 million, and notes that stablecoin activity is already concentrated among large financial institutions, suggesting that the real impact on smaller banks may be even smaller.
“The answer lies not in the level of deposits, but in their composition,” the report explained. Under the current “ample reserves” regime, these shifts between banks do not force lenders to shrink their balance sheets.
Instead of disappearing from the banking sector, much of the money backing stablecoins is recycled through it. When issuers invest reserves in Treasury bills or similar instruments, those funds typically end up being redeposited elsewhere in the banking system, maintaining the overall level of deposits even as individual banks see outflows.
Only a small proportion of stablecoin reserves, estimated at around 12% in the report’s baseline, are held in forms that can meaningfully limit lending. Even then, the effect is heavily diluted by bank reserve requirements and liquidity buffers, which absorb much of the potential impact before it reaches borrowers.
The result is a multi-stage dampening effect: tens of billions of dollars can move between stablecoins and deposits, but only a fraction is ultimately converted into new loans.
This dynamic also weakens the argument that the stablecoin dividend poses a particular threat to community banks. According to the report, smaller lenders would see just $500 million in additional lending under a yield ban, an increase of about 0.026%.
In other words, White House economists argue that the policy provides minimal benefits to the very institutions it is often framed to protect.
The report said that generating large lending effects requires the hypothetical stacking of several extreme conditions at once: a stable coin market many times larger than today’s, reserves completely locked away from lending, and a shift in Federal Reserve policy away from its current abundant reserves. Without these scenarios, the impact remains marginal, it said.
The costs fall on consumers
The report also reinforced the crypto industry’s arguments in consumer terms. By eliminating dividends, policymakers would effectively reduce returns on a growing category of dollar-based assets that compete with traditional deposits.
The economists estimated that such a ban would impose a net welfare cost, as users give up the benefit without receiving meaningful improvements in credit availability in return. Instead of assuming that stablecoin dividends are destabilizing, the report suggests that policymakers should demonstrate that limiting them will provide tangible benefits to the real economy, particularly for small businesses and households that rely on bank loans.
So far, according to the administration’s own economists, that case is unproven.
