U.S. Banks Challenge Yield-Bearing Stablecoins as Crypto Bill Advances

U.S. banks are escalating a campaign against stablecoins that pay interest. Their opposition intensifies as Congress advances a key cryptocurrency bill, setting up a pivotal legislative fight.

The American Banking Association (ABA) is leading this push. It has warned that allowing stablecoins to offer yields could threaten a key funding source for traditional banks.

ABA Sounds the Alarm on Yield-Bearing Stablecoins

Earlier this week, the American Banking Association (ABA) published a draft of its outlook for 2026.
Titled the “Blueprint for Growth,” the document outlines the group’s main priorities. A core goal is to prevent yield-bearing stablecoins from becoming a normal part of finance.

Just released – ABA’s 2026 Blueprint for Growth outlines key policy priorities: https://t.co/KsOScu1Lgs pic.twitter.com/C3gMrXQn84

— American Bankers Association (@ABABankers) January 20, 2026

The ABA warns that if stablecoins can pay interest, they may directly compete with bank deposits.

Customers might move their money to seek higher returns. Since community banks rely heavily on local deposits to fund loans, they could be particularly affected. The group states this could weaken lending activity in many areas.

According to the ABA, yield-bearing stablecoins would attract customer funds that would otherwise remain in bank accounts and be used to support local lending activity.

This concern is shared by senior bank leaders.

Speaking during an earnings call earlier this month, Bank of America chief executive Brian Moynihan warned that yield-bearing stablecoins could pull as much as $6 trillion out of the U.S. banking system.

Citing data from Treasury-cited studies, Moynihan pointed out that a considerable share of bank deposits could move into stablecoins if issuers are given the green light to pay interest under the new market structure bill.

With these stablecoin-based products serving as de facto money market mutual funds, they could shift users’ funds into cash, short-term treasuries, or bank reserves – instead of deploying these funds for lending as traditional banks do.

Over time, Moynihan believes that this shift will move deposits away from bank balance sheets, cutting available credit, especially for small and mid-sized businesses that traditionally rely on bank loans.

Debate Over Stablecoin Rewards Divides Industry and Lawmakers

The debate surrounding stablecoin rewards has taken center stage and appears to be the latest salvo in the Digital Asset Clarity Act’s turbulent road to being passed.

Many in Congress believe the bill could pass this year. Broad political support exists, including from former President Donald Trump. However, the issue of yields continues to create division.

Earlier this week, Coinbase Chief Executive Brian Armstrong said the exchange would withdraw its support for the bill, calling several provisions “bad” and arguing that no legislation is preferable to flawed legislation.

Armstrong said efforts to eliminate stablecoin rewards would shield banks from competition while slowing innovation in the crypto sector. In his view, the bill in its current form would do more harm than good to the industry.

Interestingly, some within the banking industry have also come out against the relentless push to ban stablecoin rewards.

When asked about the potential impacts of stablecoin rewards on the banking industry, a spokesperson for JPMorgan downplayed the threat, explaining that stablecoins would only serve as one of the many payment forms available today, which have complementary use cases of their own.

Attention now turns to Capitol Hill. Lawmakers will continue working to gather the votes needed to pass the legislation.