WASHINGTON — A new White House report finds that restricting stablecoins from offering yield would have only a modest effect on lending by community financial institutions, challenging long-standing concerns that digital assets could significantly drain deposits from smaller banks and CUs.
Separately, Teasury has proposed new rules aimed at establishing anti-money laundering and sanctions compliance requirements for payment stablecoins
The analysis, released by the White House Council of Economic Advisers, examined provisions under the GENIUS Act, a 2025 law that requires stablecoins to be fully backed by reserves and prohibits issuers from paying interest or yield to holders.
As the CU Daily has been reporting, financial institutions and the crypto industry have been locked in a sharp disagreement over whether yield-paying stablecoins would lead to a deposit run-off at traditional financial institutions.
According to the report, banning stablecoin yield would increase overall bank lending by about $2.1 billion — roughly 0.02% of total lending — with community banks accounting for a minority of that gain.
- Community banks, defined as institutions with less than $10 billion in assets, would generate about 24% of the additional lending, or roughly $500 million.
- That represents an estimated 0.026% increase in lending activity for those institutions.
‘Limited’ Effect
The report concludes that the overall impact on community financial institutions would be limited, with most of the incremental lending flowing to larger banks, which would account for about 76% of the increase.
White House economists also said concerns that stablecoins could trigger large-scale deposit outflows from community banks appear overstated. Because stablecoin reserves must be held in traditional financial assets — such as bank deposits or U.S. Treasurys — funds largely remain within the banking system even when consumers shift into digital dollars.
The report further found that the policy trade-offs may not favor restrictions. While limiting stablecoin yield slightly boosts lending, it carries an estimated $800 million net welfare cost to consumers due to lost returns, producing a cost-benefit ratio of 6.6 to 1.
‘Marginal Support’
Overall, the White House analysis suggests that prohibiting stablecoin yield would provide only marginal support to community banks’ lending capacity while imposing broader costs, reinforcing the view that stablecoins are unlikely to significantly disrupt smaller financial institutions’ funding models under current regulatory frameworks.
Proposal for AML Rules, Compliance on Payment Stablcoins are Issued
Separately, Treasury has proposed new rules aimed at establishing anti-money laundering and sanctions compliance requirements for payment stablecoins, as regulators seek to balance financial crime safeguards with support for innovation in digital assets.
The proposal, issued by Treasury and its Office of Foreign Assets Control, would implement provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, enacted last year.
According to Treasury, the rule is intended to create “an appropriately tailored regime to mitigate potential illicit finance risks” associated with payment stablecoins while promoting continued innovation in the sector.
The proposal would treat permitted payment stablecoin issuers, or PPSIs, as financial institutions under the Bank Secrecy Act, subjecting them to anti-money laundering requirements. Treasury said the GENIUS Act establishes a federal regulatory framework for payment stablecoins and directs the agency to impose such obligations.
Additional Mandate
“The GENIUS Act also mandates that PPSIs maintain an effective sanctions compliance program and directs Treasury to issue appropriate regulations implementing such obligations,” Treasury said.
The Financial Crimes Enforcement Network, a bureau within Treasury, issued a concurrent release outlining how the proposed rule would apply existing financial institution requirements to stablecoin issuers.
“The proposed rule would subject PPSIs to requirements applicable to financial institutions relating to prevention of money laundering and impose obligations specified in the GENIUS Act,” FinCEN said. “Consistent with FinCEN’s efforts to modernize BSA requirements, the proposed obligations are designed to be fit for purpose, assist law enforcement, and minimize unnecessary burden.”
FinCEN added that the proposal would require stablecoin issuers to adopt and maintain effective sanctions compliance programs, in line with statutory requirements under the GENIUS Act.
