The United States' Council of Economic Advisers published a model-based assessment of how a binding prohibition on stablecoin yield, as set out in the GENIUS Act and potentially tightened by some variants of the proposed CLARITY Act, would affect bank lending. The analysis concludes that restricting yield would do little to protect bank lending under an ample-reserves monetary framework, while imposing net welfare costs by removing competitive returns for stablecoin holders. In the baseline calibration, eliminating stablecoin yield increases bank lending by USD 2.1 billion, or about 0.02% of total loans, and is associated with a net welfare cost of USD 800 million and a cost-benefit ratio of 6.6. Large banks account for 76% of the additional lending, while community banks with assets below USD 10 billion account for 24%, implying about USD 500 million of extra community-bank lending (a 0.026% increase). The paper also notes that the GENIUS Act’s issuer-focused yield ban may not fully bind where intermediaries offer rewards funded by issuer revenue-sharing arrangements, citing “USDC Rewards” as an example. Even under stacked “worst-case” assumptions, the largest lending effect reported is USD 531 billion (4.4% of bank loans as of 2025Q4), which the model ties to simultaneously assuming the stablecoin market rises to roughly six times its current share of deposits, reserves shift into unlendable cash rather than Treasuries, and the Federal Reserve abandons its current monetary framework.
Council of Economic Advisers 2026-04-08
United States' Council of Economic Advisers estimates stablecoin yield prohibition would add USD 2.1 billion in lending with USD 800 million welfare cost
The U.S. Council of Economic Advisers published a model-based assessment finding that a binding prohibition on stablecoin yield, as contemplated in the GENIUS Act and some CLARITY Act variants, would have negligible impact on bank lending under an ample-reserves framework while imposing net welfare costs by removing competitive returns for stablecoin holders. Eliminating stablecoin yield raises bank lending by USD 2.1 billion (0.02% of total loans) but generates a net welfare cost of USD 800 million, with large banks capturing 76% of the additional lending and community banks about USD 500 million. The paper notes issuer-focused yield bans may not fully bind where intermediaries offer rewards funded by issuer revenue-sharing, and that even under stacked “worst-case” assumptions the largest lending effect is USD 531 billion (4.4% of projected 2025Q4 bank loans).