The American Bankers Association has been warning that stablecoin rewards will siphon deposits from community banks. The actual numbers tell a different story.
Community bank deposits have grown by roughly $482 billion, a 26% increase, from June 2019 to March 2026. That growth happened during the exact period when platforms like Coinbase were offering rewards on stablecoin holdings.
The data versus the lobbying
Coinbase Chief Policy Officer Faryar Shirzad laid out the counterargument in a recent opinion piece, pointing to multiple studies that undercut the ABA’s position. Research from Charles River Associates found no statistically significant relationship between stablecoin activity and declines in bank deposits. The White House Council of Economic Advisers reached a similar conclusion independently.
The White House analysis went further, modeling what would happen if stablecoin rewards were banned entirely. The result: traditional lending would increase by approximately 0.02%, translating to around $2.1 billion. The White House economists found it would predominantly flow to larger banking institutions, not the community banks the ABA claims to be protecting.
Coinbase has offered rewards on USDC holdings for over four years now. During that entire span, community banks experienced no meaningful deposit outflow attributable to stablecoin incentives.
The GENIUS Act and its aftermath
The regulatory landscape shifted when the GENIUS Act took effect on July 18, 2025. The legislation prohibits stablecoin issuers themselves from paying interest or yields on their tokens. But it carved out a distinction: third-party platforms, like exchanges, can still offer rewards on stablecoin holdings as marketing incentives.
The banking industry’s next legislative push centers on the CLARITY Act, which would attempt to close that third-party rewards channel.
What’s actually at stake
The competitive dynamics here mirror what happened when money market funds emerged in the 1970s. Banks fought those products too, arguing they would destabilize the financial system. Money market funds survived and eventually became a multitrillion-dollar asset class.
If the CLARITY Act or similar legislation passes and restricts third-party stablecoin rewards, it would remove a key incentive that drives retail adoption of dollar-denominated digital assets. Conversely, if the current framework holds, institutions might be forced to raise deposit rates or develop their own digital asset offerings.