Assessing the Economic Impact of Stablecoin Yield Restrictions

In April 2026, the Council of Economic Advisers (CEA) released a report titled Effects of Stablecoin Yield Prohibition on Bank Lending. The CEA is a group of economists who advise the US President on economic policy. This report examines how banning interest or yield on stablecoins might affect bank lending in the United States. It focuses on rules in the GENIUS Act signed in July 2025, which requires full reserves for stablecoins and prohibits issuers from paying yield to holders.

Background and Purpose

Stablecoins are digital tokens backed one-to-one by US dollars or safe assets like short-term Treasuries. The GENIUS Act created the first full federal rules for them. Some policymakers worry that if stablecoins pay competitive interest, people will move money out of regular bank accounts into stablecoins. Since stablecoin reserves are not lent out like bank deposits, this shift could reduce overall bank lending. The report on “Effects of Stablecoin Yield Prohibition on Bank Lending” by the Council of Economic Advisors to the White House, builds a simple economic model to test how much a yield ban would actually help banks.

Key Findings

The CEA model shows that prohibiting yield on stablecoins has only a very small effect on bank lending. In the baseline case:

1. Bank lending increases by just $2.1 billion which equals a 0.02% rise in total bank loans.

2. Community banks (small banks with assets below $10 billion) see only $500 million more lending, or 0.026% growth.

3. There is a net welfare cost of $800 million because people lose access to competitive returns on their money.

   
   

Even when the model uses the most extreme assumptions (much larger stablecoin market, all reserves held as cash in banks, and scarce reserves at the Federal Reserve), the increase in total lending reaches only $531 billion (about 4.4%). Community bank lending rises by $129 billion (6.7%) in this unlikely scenario.

The report explains why the effects are small. Most stablecoin reserves (around 88%) are held in Treasuries, not bank deposits. Money moved into stablecoins largely stays within the banking system through other channels. Banks also hold large liquidity buffers, so they do not turn every extra deposit into new loans.

Implications

The CEA report concludes that fears of stablecoins harming bank lending are overstated. A yield ban would do very little to protect or expand lending while removing benefits for stablecoin users, such as better returns and fast payments. The analysis suggests the prohibition is not an effective way to support banks, especially community banks.

The findings challenge stronger claims in other studies that predicted lending losses in the trillions. By carefully tracking where money actually goes and including realistic bank behavior, the model shows much smaller impacts.

This report is important for ongoing US policy debates. It supports a more balanced view on stablecoin rules - one that allows innovation and consumer benefits without heavy restrictions on yield. It also notes that stablecoins bring other advantages, such as faster global payments and safer assets for users in some markets.

Conclusion

The Council of Economic Advisers’ April 2026 analysis provides clear evidence that banning yield on stablecoins would bring minimal gains for bank lending at a real cost to users. Policymakers may use this to guide future updates to the GENIUS Act or related rules like the CLARITY Act. The overall message is that stablecoin growth does not pose a major threat to traditional banking under current conditions.

Source:

1. White House. Effects of Stablecoin Yield Prohibition on Bank Lending. https://www.whitehouse.gov/research/2026/04/effects-of-stablecoin-yield-prohibition-on-bank-lending/