White House: Banning Stablecoin Yield Hurts Consumers
White House: Banning Stablecoin Yield Hurts Consumers
The White House has released a study stating that banning stablecoin yield would do very little to protect bank lending, and that concerns around bank deposit flight are exaggerated. The primary keyword, White House banning stablecoin yield, is a crucial aspect of this discussion.
Understanding Stablecoin Reserves
Stablecoin reserves are invested in Treasury bills, repo agreements, and money-market funds, which flow back into the banking system. The White House Council of Economic Advisers (CEA) found that aggregate deposits across the banking system remain essentially unchanged.
Stablecoin Reserve Movement
- Most stablecoin reserves are reinvested, not buried in a vault
- 88% of stablecoin reserves circulate through normal credit channels
- Only 12% of stablecoin reserves are truly locked out of lending
Impact of Banning Stablecoin Yield
Banning stablecoin yield would increase bank lending by just $2.1 billion, a 0.02% change against a $12 trillion loan book. Consumers would lose $800 million more in forgone returns than borrowers would gain from slightly lower rates.
Cost-Benefit Ratio
The cost-benefit ratio calculated by the White House CEA was 6.6, meaning the policy costs more than six times what it delivers. This is due to the fact that stablecoin reserves are largely reinvested, not removed from the banking system.
Key Takeaways
- Banning stablecoin yield would have a minimal impact on bank lending
- Consumers would lose out on significant returns if stablecoin yield is banned
- The cost-benefit ratio of banning stablecoin yield is 6.6
- Stablecoin reserves are largely reinvested, not removed from the banking system
Frequently Asked Questions
What is the primary concern with banning stablecoin yield?
The primary concern is that it would hurt consumers more than it helps banks, as they would lose out on significant returns.
How do stablecoin reserves move through the financial system?
Stablecoin reserves are invested in Treasury bills, repo agreements, and money-market funds, which flow back into the banking system through dealers and counterparties.
