WASHINGTON—As Congress moves toward legislation to establish a regulatory framework for digital-asset markets, the Independent Community Bankers of America has released new data warning that allowing crypto exchanges, affiliates, and other intermediaries to pay interest, yield, or rewards on payment stablecoin holdings could harm local economies.
As CUToday.info has reported, crypto firms paying interest or rewards on stablecoin holdings threatens to siphon money away from credit unions.
Based on macroeconomic modeling from new industry research, ICBA estimates that continuing to allow crypto intermediaries to pay interest or yield on payment stablecoin holdings would reduce community bank lending by $850 billion due to a $1.3 trillion reduction in the industry’s deposits—significantly diminishing access to credit and economic resilience for small businesses, consumers, and agriculture in local communities.
Today, community banks hold $4.8 trillion in deposits that fuel $4 trillion in total lending activity. A dramatic decline in community bank lending capacity would stifle small-business expansion and innovation, impair job creation, and hinder economic growth in communities across America, ICBA stated.
ICBA noted that it is releasing these projections amid Treasury estimates that stablecoins will grow from $300 billion to trillions of dollars by the end of the decade.
“The nation’s community banks have a proven commitment to keeping credit and banking services available to the nation’s local economies through good times and bad,” ICBA President and CEO Rebeca Romero Rainey said. “Our analysis shows that Congress must extend the prohibition on payment of yield and interest on payment stablecoin holdings to crypto exchanges, affiliates, and other intermediaries. The role community banks serve is too important to risk.”