White House "Strongly Supports" Stablecoins: Rewards are Not Bank "Killers," "Clarity Act" Stalemate May be Broken

White House economists said in a report on Wednesday that banning cryptocurrency companies from offering stablecoin rewards to customers would not have a substantial impact on community banks. This conclusion marks the latest development in the ongoing fierce conflict between the two industries, which has previously led to a stalemate in related legislation in Congress. According to the report from the Council of Economic Advisors (CEA), banning such rewards would only slightly increase traditional loan amounts - by approximately 0.02%, or $21 billion, with most of the growth flowing to large banks rather than community lending institutions. The report stated: "Seeking positive social welfare effects by banning rewards is fundamentally impractical. In short, a ban on rewards does little to protect bank lending and instead deprives consumers of the benefit of competitive returns on stablecoin holdings." The report refuted the findings of the industry organization "Independent Community Bankers of America". The association had suggested that if legislation explicitly allowed for the payment of specific interest on stablecoins (which typically offer more lucrative returns), small banks could face a risk of losing $1.3 trillion in deposits and $850 billion in loans. The CEA is supposed to provide objective advice on domestic and international economic policy issues. However, the committee is located within the White House executive office, and President Trump has consistently supported the cryptocurrency industry and actively pushed for Congress to advance stablecoin legislation. Stablecoins are designed to maintain a stable price, usually pegged to the dollar. In July of last year, Trump signed a landmark regulatory framework for stablecoin issuers, prohibiting them from offering any form of interest or returns. However, the law did not ban distribution partners from offering rewards linked to stablecoin balances. For example, Coinbase offers a 3.5% return for customers holding USDC (a stablecoin issued by Circle Internet Group Inc.). Proposed legislation known as the "Clarity Act" could address this cognitive loophole - either by prohibiting third parties from offering rewards, or by establishing its legality. However, due to significant conflicts between the cryptocurrency industry and banking leaders, the bill has been delayed for months and has sparked negotiations led by the White House to facilitate an agreement.