White House Report Finds Stablecoin Yield Poses Limited Risk to Banks
New analysis based on current economic models suggests concerns over deposit flight may be overstated
Welcome to the Wednesday edition of the Crypto In America newsletter!
What you’ll read: A White House report suggests stablecoin yield may not be the threat to banks they’ve warned of; Roman Storm returns to court; Mysten Labs co-founder and CEO Evan Cheng joins the podcast; and the news driving headlines this week.
A report from the White House Council of Economic Advisers released Wednesday morning finds that prohibiting yield on stablecoins would have only a minimal impact on preventing deposit flight from banks, suggesting those concerns may be overstated.
The report comes amid a months-long standoff between banking and crypto lobbyists that has stalled market structure legislation in the Senate, with banks warning that yield-bearing stablecoins would drive deposit flight and hit lending, and the crypto industry arguing there’s little evidence to back that up. It also follows weeks of pressure from Senate Banking lawmakers, including Senators Thom Tillis (R-NC), Bill Hagerty (R-TN), and Cynthia Lummis (R-WY), on the White House to release the report to inform ongoing negotiations with industry, as Crypto In America reported last month.
The White House analysis is model-based, using current market conditions to simulate how stablecoin yield would affect deposits and lending under different scenarios. Under those conditions, the model finds that eliminating yield would increase bank lending by just $2.1 billion, about 0.02% of total loans, while resulting in a roughly $800 million net welfare loss, meaning the costs to consumers outweigh the benefits to the system. The report also tests a worst-case scenario where stablecoins could more meaningfully impact lending, but only under conditions that do not reflect today’s system, including zero excess reserves and a major shift in Fed policy.
“The yield prohibition in the GENIUS Act—and its proposed reinforcement through the CLARITY Act—may be motivated by the concern that competitive stablecoin returns will draw deposits out of the banking system and contract lending,” the report says. “Our model shows that this concern is quantitatively small.”
The conclusions align more closely with the crypto industry’s view that allowing customers to earn yield on stablecoins would have limited impact on bank business models.
“It’s good to see the White House confirm what other serious analysis has already shown - that stablecoins are an opportunity and not a threat,” said Coinbase Chief Policy Officer Faryar Shirzad, whose company has been a leading advocate for allowing customers to earn yield after CEO Brian Armstrong withdrew support for the market structure bill in January, citing excessive deference to banks on the issue.
It’s unclear what, if any, implications the study could have on a potential deal between banks and the crypto industry on allowing yield and rewards on stablecoins. As Crypto In America reported on Monday, parties close to the negotiations have remained largely silent on where things stand, though two sources close to the process expressed hope that negotiations are in a good place.
Crypto In America reached out to spokespeople for Sen. Tillis and Sen. Alsobrooks, the two senators leading negotiations on the yield compromise, as well as banking representatives, but did not hear back in time for publication.
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Roman Storm Returns to Court
Eight months after Tornado Cash developer Roman Storm was found guilty in the Southern District of New York of operating an unlicensed money-transmitting business, a federal judge will hear arguments Thursday on whether that conviction should be thrown out.
Quick recap: In August 2025, a jury deadlocked on more serious charges tied to money laundering and sanctions violations, and Storm was released on bail following his conviction on a single count of operating an unlicensed money-transmitting business. His defense is now asking the court to throw out that conviction, arguing the government failed to prove he knowingly agreed to facilitate illicit activity through the privacy mixer he co-founded. The DOJ has also indicated it plans to retry the case on the two unresolved counts, with a tentative retrial set for October.
New wrinkle: Just days before the hearing, federal prosecutors pushed back on Storm’s attempt to lean on a recent Supreme Court ruling (Cox v. Sony), calling it irrelevant. The defense had argued the case — which limits liability for platforms over user behavior — could support Storm’s position that he should not be held liable for how bad actors used Tornado Cash. The DOJ disagrees, arguing in a letter to the court that Storm failed to take meaningful steps to prevent illicit activity and had direct knowledge of illegal funds flowing through Tornado Cash, including those tied to a $600M North Korea-linked hack.
In response, Storm’s defense lawyer Keri Curtis Axel told Crypto In America, “We look forward to addressing the government’s letter at the hearing on Thursday.”
Why it matters: Judge Failla’s decision will be another key indicator of how U.S. law treats open-source software developers at a crucial time for the industry, as key legislation moves through Congress that includes protections for developers. It also comes amid recent guidance from the U.S. Treasury acknowledging lawful uses for blockchain privacy tools.
For more on the case, check out this blog post from our friends at the DeFi Education Fund.
Sui Founder on Building for Institutions, Stablecoin Yield Policy, and the AI–Crypto Future
This week on the podcast, we sat down with Evan Cheng, co-founder and CEO of Mysten Labs, the team behind the Sui blockchain, to talk about how crypto is evolving from experimental infrastructure into the backbone of modern financial technology.
Cheng walked through building Mysten Labs and Sui in a shifting U.S. regulatory environment, how that clarity is unlocking new business models, and where institutions are leaning in today. We also dig into what limits on stablecoin yield could mean for bank competitiveness amid the broader policy debate in Washington, and why he believes AI-driven agents will reshape payments and position blockchain as the trust layer for an automated economy.
Watch this episode on all platforms here.
Midweek Recap
ICYMI: Here are some of the biggest stories making headlines this week.
Bitcoin jumped following the announcement of a two-week ceasefire between the U.S. and Iran on Tuesday, pushing the asset above $71,000, while oil fell roughly 16% to around $90–$95 as the Strait of Hormuz reopened.
Morgan Stanley’s Bitcoin ETF launched on NYSE Arca under the ticker MBST, marking the first time a major U.S. bank has issued a spot Bitcoin ETF under its own name.
The Federal Deposit Insurance Corporation (FDIC) approved a proposed rule to govern stablecoin issuers under the GENIUS Act, setting capital, liquidity, and custody standards, with Chair Travis Hill reaffirming that tokenized deposits will be treated as traditional bank deposits. The rule will be open for a 60-day comment period.
Robinhood and BNY Mellon have been tapped by the U.S. Treasury to serve as trustee and build the brokerage platform for Trump Accounts, custodial retirement accounts for children under 18.
SEC Chair Paul Atkins said a safe harbor proposal for capital raising in crypto has advanced to White House review, with a formal rule expected shortly.
Binance founder CZ released his autobiography “Freedom of Money,” recounting the building of the exchange, its run-ins with regulators, and his time in prison.
CME Group announced plans to launch Avalanche and Sui futures on May 4 pending regulatory approval.
The U.S. Treasury’s FinCEN proposed sweeping changes to bank anti-money laundering programs, with a renewed focus on combating illicit finance.
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