The Clarity Act, considered one of the most important cryptocurrency laws in the US, has been delayed for months due to disagreements over interest payments on stablecoins. CLARITY is stalled because of disputes between banks and the cryptocurrency sector regarding interest payments on stablecoins.
While the banking sector advocates for a ban on interest payments on stablecoins, the cryptocurrency sector supports stablecoin yields.
As the debate over stablecoin interest rates continues, a White House council has released a report on stablecoin interest rates.
Accordingly, the US White House Council of Economic Advisors (CEA) stated that the impact of stablecoin interest payments on local banks would be minimal and limited.
According to Bloomberg, the White House Council of Economic Advisors stated that cryptocurrency companies paying interest to customers holding stablecoins would not trigger a wave of deposit outflows from banks.
White House economists believe banning stablecoin yields would only increase bank lending by 0.02%. This assessment suggests that the impact of stablecoin rewards on traditional financial institutions is minimal and alleviates concerns about potential disruptions.
CEA economists also concluded that this measure would be largely ineffective in protecting banks and could deprive consumers of competitive returns.
However, the CEA’s analysis contradicts that of the Independent Regional Banking Council (ICBC). In a recent analysis, the ICBC stated that allowing interest payments on stablecoins could lead to banks withdrawing up to $1.3 trillion in deposits and up to $850 billion in loans.
The White House appears to have sided with the cryptocurrency sector regarding stablecoin returns with its latest report.
*This is not investment advice.