The American Bankers Association has warned that yield-bearing stablecoins could take money away from community banks. It said that could reduce lending in local areas and make it harder for small banks to support households and businesses.
The group said the main risk is deposit flight. If people move their savings from bank accounts into stablecoins that pay yield, banks may lose a cheap source of funding.
According to the ABA, that would hit community banks especially hard. These banks often rely on local deposits to fund loans for small businesses, homebuyers and farmers.
The group pointed to its own estimates from Iowa. It said if local banks there lose between $5.3 billion and $10.6 billion in deposits to stablecoins, lending in the state could fall by $4.4 billion to $8.7 billion.
That view clashes with a recent White House report. The Council of Economic Advisers said banning yield on payment stablecoins would only add about $2.1 billion to total US bank lending, which is a very small increase overall.
But the ABA said that misses the real issue. It argued that the real question is not what happens if yield is banned, but what happens if stablecoins are allowed to act like interest-paying savings products at a much larger scale.
The group said the danger grows if the stablecoin market expands to $1 trillion or even $2 trillion. In that case, yield could become a major reason for people to move money out of traditional bank deposits.
The debate now matters as US lawmakers work on stablecoin rules. For the banking industry, the fight is simple: stablecoins should stay as payment tools, not become direct competitors to savings accounts.
