American Bankers Association Warning: Allowing Stablecoin Yield Will Accelerate Deposit Runoff, Devastate Community Bank Lending

April 13: An article in the American Bankers Association (ABA) Banking Journal on April 13 notes that experts—including the ABA’s Chief Economist—argue the White House Council of Economic Advisers (CEA)’s recent payment stablecoin research report raises misleading questions for policymakers. The CEA report focuses on *how a ban on payment stablecoin issuance would impact bank lending*, concluding the ban would boost bank lending by just ~$1.2 billion with minimal overall effect. But the ABA contends the real policy concern is not the consequences of a “ban,” but the risks of allowing **yield-bearing** payment stablecoins: - **Accelerated deposit outflows**: Yield incentives would drive households and businesses to shift funds from bank deposits (especially at community banks) to stablecoins—with significant impact if the market grows to $1–$2 trillion. ABA analysis shows Iowa alone could see $4.4 billion–$8.7 billion in reduced loans. - **Community bank harm**: Deposit outflows would force community banks to replace funds with higher-cost wholesale financing (e.g., Federal Home Loan Bank prepayments), raising funding costs and cutting loans to local households and small businesses. - **Not a harmless “reshuffling”**: While the CEA claims deposits would only “reshuffle” within the banking system with little net effect, the ABA argues flows from community banks to a handful of large institutions or stablecoin reserve accounts would harm areas reliant on relationship-based lending. The ABA maintains banning yield-bearing payment stablecoin issuance is a prudent safeguard—allowing stablecoins to mature as a payment innovation, not an economic risk as an insured deposit alternative.