The Council of Economic Advisers (CEA), a panel of three prominent economists who advise the President of the United States, published a study on April 8 that seriously undermines the American banking lobby's stance on stablecoin yields.
With the Senate committee vote on the CLARITY Act scheduled for April 13, the timing is anything but coincidental.
What are we talking about?
In the United States, the GENIUS Act (signed in July 2025) requires full 1:1 reserve backing but prohibits issuers from paying yield directly to holders.
That said, the law doesn't stop intermediaries — like Coinbase with its "USDC Rewards" — from doing so through revenue-sharing agreements with issuers.
Some versions of the CLARITY Act aim to close that loophole. Banks argue that yield-bearing stablecoins would drain their deposits and weaken lending.
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The CEA tears that argument apart
In short, banks claim that if stablecoins pay yield, savers will pull their money out, shrinking the banks' ability to lend.
The CEA modeled that scenario, and the verdict is damning: banning yield would only net banks an extra $2.1 billion in loans — a rounding error in a $12.1 trillion credit market. Meanwhile, consumers would lose $800 million a year in income.
Put differently, for every dollar of credit the banks gain, consumers lose $6.60.
And for community banks — the very institutions the law is supposedly designed to protect — the upside would be negligible: $500 million, or 0.026% of their loan portfolios.
The CEA even stress-tested the model under worst-case assumptions — a stablecoin market six times larger, fully frozen reserves, a shift in Fed monetary policy — and the impact on lending still came out limited.
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Why it matters
Behind the technical debate, the real stakes are strategic. If stablecoins can offer yield, they become a direct competitor to money market funds and savings accounts — a dollar-denominated instrument with 24/7 settlement, backed by Treasury bills. If they can't, they remain little more than payment tokens.
The CEA also points out that 88% of USDC reserves are invested in T-bills and repos (not bank deposits), and therefore recirculate into the banking system through dealer banks.
The actual effect on credit is marginal.
Separately, the FDIC approved on April 7 a 190-page regulatory framework for stablecoin issuers under the GENIUS Act, paving the way for FDIC-insured banks to issue stablecoins themselves through subsidiaries.
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The political backdrop isn't exactly neutral
Donald Trump and his family are tied to World Liberty Financial (WLFI), the issuer of USD1 — a yield-bearing stablecoin.
A Trump-affiliated LLC holds roughly 38% of WLFI, which earns revenue from the interest generated by its reserves.
Several senators, including Elizabeth Warren, have called out what they see as a direct conflict of interest between the administration's pro-yield position and the president's private financial stakes.
The Big Whale's take
The CEA study gives political cover to senators who want to vote against banning yield.
The White House's message couldn't be clearer: yield-bearing stablecoins don't threaten the financial system — they strengthen demand for U.S. debt.
The committee vote on April 13 will be decisive.
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