Stablecoin rewards aren't the threat banks made them out to be.
White House economists say banning yield would only increase bank lending by about 0.02%, a negligible shift in a trillion-dollar system.
According to the analysis, banning stablecoin rewards would increase bank lending by just 0.02%, or around $2.1 billion in a $12 trillion lending market. OBJ
Why so small?
Because most stablecoin reserves don't actually leave the financial system. They are typically held in Treasuries or redeposited into banks, meaning the funds continue circulating rather than disappearing from lending channels.
Only a small portion, estimated at around 12%, is held in ways that limit lending, and even that effect is further reduced by bank reserve requirements and liquidity buffers.
At the same time, the report finds that banning yield comes with tradeoffs. Users lose access to competitive returns on stablecoin holdings, resulting in an estimated $800 million annual welfare loss, while the benefits to banks remain marginal. oBu
Even community banks, often cited as the most vulnerable, would see only a modest increase in lending.
In short, the data suggests that stablecoin rewards are not a meaningful threat to the banking system, and that restricting them may do more to limit user benefits than to support bank lending.
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