Clarity Act Debate Heats Up as Banks Pushes Back CEA Report

The White House Council of Economic Advisers (CEA) had recently released a report on payment stablecoins, and now major banking groups are pushing back. The American Bankers Association (ABA) responded back today and argued that regulators are missing out on the bigger risk.

According to the ABA, yield-bearing stablecoins could pull large amounts of money out of community banks and make it more expensive for them to operate and limit their ability to give loans locally.

The response, which has been written by chief economist Sayee Srinivasan and VP Yikai Wang, points out that the CEA is focusing on the wrong issue. The CEA report mainly looked at whether banning interest (yield) on stablecoins would slightly increase bank lending.

The report that came out, estimated a modest $1.2 billion boost. However, ABA believes this view is too narrow and it essentially does not reflect what could actually happen in the market.

Instead, the ABA highlights a more aggressive scenario. If stablecoins start offering yields and become more attractive to users, then their market size could grow. If that happens, a significant amount of deposits could then move out from traditional banks and into these said digital assets.

Yield Ban Debate Heats Up Amid Clarity Act Push

This debate is heating up in Washington as rules around stablecoins take shape. After the White House showed support for limiting yield under the Clarity Act momentum, the banks issued this response today, April 13, 2026.

In the statement, the ABA warned, “By focusing on the effects of a prohibition, the CEA paper risks creating a misleading sense of safety by avoiding the much more consequential scenario: yield-paying payment stablecoins scaling quickly.”

The banks are urging the policymakers to also scrutinize deposit outflows through banks if stablecoins offering returns become widely adopted.

Community Banks Face Immediate Squeeze

The response also highlighted that the community banks rely on local deposits for lending to households and small businesses. If yield-paying stablecoins attract that money, banks cannot easily replace it.

Moreover, these banks will then have to rely on costlier funding sources such as Federal Home Loan Bank System advances or capital markets, which raises borrowing costs for customers.

Even if total deposits across the system stay stable, the impact is uneven. The ABA says local economies could take a hit, estimating lending in states like Iowa could drop by $4.4-8.7 billion if stablecoins scale rapidly.

Consensus On Migration Risks, Gaps in Bank-Level Analysis

There’s broad agreement across industry and academic research on one key point which is offering yield makes stablecoins far more attractive, encouraging people and businesses to move money out of banks, unless rules stop it.

The American Bankers Association says these funds would like to sit with large issuers and not return to smaller banks, reducing their ability to lend.

It also criticizes the White House Council of Economic Advisers for treating the banking system as one uniform entity. In reality, deposit shifts tend to benefit big banks, leaving smaller community banks struggling and increasing the risk of local credit shortages.

ABA Flags Narrow Banking Risk as Stablecoin Debate Deepens

The ABA also warns that these stablecoins could also act like “narrow banking”, where funds are held in reserves but do not support real-world lending. This concern is similar to why policymakers have pushed back against a Central Bank Digital Currency, fearing it could weaken credit flow in the economy.

Because of this, the ABA argues that banning yield on stablecoins is not extreme but a practical option. It would allow stablecoins to grow as payment tools without directly competing with bank deposits.

As regulation moves forward in Congress, including under the Clarity Act, this debate highlights a growing divide between crypto firms and traditional banks.

Final Thought

Bank pushback from the ABA could slow down the Clarity Act because with this  response, the lawmakers will have to also consider the deposit outflows. With a key roundtable scheduled on the 16th, the debate may intensify before a final decision is reached. While it does not block the progress, it could, however, lead to more hearings, amendments and negotiations, potentially shifting the timeline for Clarity Act depending on how quickly a consensus is reached.

Also Read: US Crypto Clarity Act Faces Deadline Pressure Amid Senate Delays