Banks are the main roadblock on yield

The fight over stablecoin yield is not really about code. It is about whether a dollar parked in a crypto wallet can compete with a dollar parked in your checking account, and banks are trying to stop that before it becomes normal. (whitehouse.gov) Congress already drew one line in July 2025 when it passed the Guiding and Establishing National Innovation for United States Stablecoins Act, known as the GENIUS Act. That law requires one-to-one reserves for payment stablecoins and says issuers cannot pay holders interest, yield, or rewards. (congress.gov, richmondfed.org) The argument did not end there because the law left a gap around middlemen. The Congressional Research Service said exchanges can still hold stablecoins for retail customers, collect reserve-related income from issuers, and pass some of that value back to customers in a way that looks a lot like yield. (congress.gov) That gap matters because the money behind stablecoins is real old-fashioned interest from short-term Treasury bills and cash-like reserves. Circle said it generated $2.747 billion in total revenue and reserve income in fiscal year 2025, with United States Dollar Coin circulation at $75.3 billion at year end. (circle.com) Banks see that yield as their turf because deposits are the raw material they use to make loans. In a December 18, 2025 letter, the American Bankers Association and 52 state bankers associations told Congress that exchange-paid stablecoin rewards could pull insured deposits out of banks and weaken lending in local communities. (aba.com) The banking groups were especially explicit about who they think gets hit first. Their letter said community banks depend on stable deposits, and that forcing banks to raise deposit rates to match crypto platforms would make credit more expensive for small businesses, farmers, homebuyers, students, and local governments. (aba.com) Crypto firms answer that banks are exaggerating the threat because stablecoins backed one-for-one do not multiply credit the way bank deposits do. On April 8, 2026, the White House Council of Economic Advisers estimated that banning stablecoin yield would raise total bank lending by just $2.1 billion, or 0.02 percent, with community banks getting about $500 million of that increase. (whitehouse.gov) That same White House analysis said the tradeoff runs the other way for consumers. Its baseline model found a net welfare cost of $800 million from eliminating stablecoin yield, which means households would lose more in foregone returns than banks would gain in extra lending. (whitehouse.gov) Regulators are now deciding whether to treat the loophole as a bug or a feature. The Office of the Comptroller of the Currency proposed rules on March 4, 2026 that would extend the GENIUS Act’s yield ban to affiliates and third parties, not just the issuer itself, and comments are due by May 1, 2026. (perkinscoie.com) There is a second layer to this fight that banks like very much. The Federal Reserve Bank of Richmond noted that tokenized deposits issued by banks are treated differently from payment stablecoins, and those tokenized deposits can still pay interest or yield. (richmondfed.org) So the rule taking shape is simple enough to explain at a kitchen table: if a bank wraps your dollars in new digital plumbing, yield can stay; if a nonbank stablecoin issuer does something similar, yield may be banned. That is why the lobbying battle is so intense, and why the roadblock is less about blockchain than about who gets to keep the economics of your idle cash. (richmondfed.org, aba.com, whitehouse.gov)