White House economists, part of the Council of Economic Advisers, reported today that banning crypto firms from offering customers yield on stablecoins won’t have a meaningful effect on community banks.
This marks the latest developments in a notable conflict between the banking industry and the crypto industry.
According to the Council:
“The conditions for finding a positive welfare effect from prohibiting yield are simply implausible. […] In sort, a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings.”
The ongoing debate between both lobbies is expected to be formalized in the Clarity Act. The legislation is to close that perceived loophole by doing one of two things – either banning rewards from third-parties on stablecoins or establishing them as legal.
It’s important to note that the Council of Economic Advisers sits within the White House’s executive office. The current administration is known to have been rather favorable and supportive of the crypto industry, which was a major part of President Trump’s election campaign.
Recall that the latest proposal for the Clarity Act was to bar crypto platforms from offering stablecoin rewards to their customers, whether “directly or indirectly,” or in any form that resembles a bank deposit. This would close all potential loopholes in the existing proposal for the legislation and prevent these platforms from introducing anything that is similar to interest-earning stablecoin offerings.
The latest report by the CEA comes in stark contrast to that as the debate heats up and continues.
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