The American Bankers Association (ABA) has issued a sharp critique of a White House report, warning that yield-bearing payment stablecoins pose a significant threat to community bank deposits and local lending if the market scales to $1–2 trillion. The ABA's analysis directly challenges findings from the White House Council of Economic Advisers (CEA), which recently concluded that banning stablecoin yield would have a minimal impact on bank lending.
The core of the ABA's argument is that interest-bearing stablecoins could accelerate deposit flight from community banks. In an article for the ABA Banking Journal, the association's chief economist stated the live policy concern is "whether allowing yield on payment stablecoins would encourage deposit flight — especially from community banks — thus raising banks’ funding costs and reducing local lending." This framing counters the CEA report, which focused on the marginal benefits of a yield ban, estimating it would increase total U.S. bank loans by only $2.1 billion (0.02%) at an annual cost of $800 million in lost consumer welfare.
The ABA presented its own modeling, using Iowa as a case study. It estimates that if $5.3–$10.6 billion in deposits move from Iowa banks into payment stablecoins, lending in the state could fall by $4.4–$8.7 billion. The association warns that community banks, when losing deposits, must replace funding with higher-cost wholesale borrowing, which translates into less lending and higher borrowing costs for local households and small businesses.
The debate is intensifying as Congress considers legislation like the GENIUS Act and CLARITY Act to regulate payment stablecoins. Some drafts propose banning or tightly constraining yield. The ABA's figures are positioned as political ammunition against treating "stablecoin as a savings product." The association cites earlier research suggesting that allowing interest on payment stablecoins could ultimately reduce community bank lending by as much as $850 billion following an estimated $1.3 trillion in deposit losses.
In contrast, the CEA's analysis was based on today's "immature" stablecoin market of roughly $300 billion and found fears about deposit drainage to be "quantitatively small." The ABA warns that in a future trillion-dollar market, yield would be the mechanism accelerating migration out of bank deposits, particularly from smaller banks into large institutions and stablecoin reserves backed by U.S. Treasuries.
