A mere fraction of stablecoin reserves, projected at around 12% in the foundational analysis, exist in forms that could significantly limit lending activities. Furthermore, this potential impact is substantially mitigated by bank reserve mandates and liquidity surpluses, which absorb much of the effect before it influences borrowers.
This creates a multi-layered dampening effect: while substantial sums may shift between stablecoins and bank deposits, only a small portion actually results in new lending.
This situation also undermines the assertion that stablecoin yields represent a serious risk to community banks. The analysis indicates that smaller financial institutions would experience only an additional $500 million in lending if yields were banned, translating to roughly 0.026% growth.
In essence, economists from the White House argue that this policy offers negligible advantages for the very institutions it claims to safeguard.
The report further elaborated that achieving significant lending outcomes would necessitate an unlikely confluence of extreme conditions: a stablecoin market significantly larger than what exists today, reserves entirely restricted from lending, and a modification of the Federal Reserve’s current ample reserves policy. Without those scenarios, the report states, the impact remains minimal.
Consumers Bear the Burden
The report also supported the crypto sector’s viewpoint from a consumer perspective. By abolishing yields, policymakers would inadvertently diminish returns on an expanding array of dollar-denominated assets that compete with conventional bank deposits.