Stablecoin Yield Ban: A $6T Deposit Flight vs. $10T Transaction Flow

The core fear for banks is a massive flight of deposits. Bank of America CEO Brian Moynihan warned earlier this month that up to $6 trillion could leave traditional banks if stablecoin yields remain legal. This isn't a distant scenario; it's framed as an immediate threat to lending capacity and financial stability.

Community banks are seen as the most vulnerable. These institutions rely heavily on local deposits to fund mortgages and small business loans. The American Bankers Association argues that without deposits, these banks lose the ability to fund mortgages and small business loans. Their entire lending model is built on a stable deposit base, making them a prime target for any shift in liquidity.

This is why the ABA has made stablecoin oversight its top 2026 policy priority. The group is pushing lawmakers to stop payment stablecoins from becoming deposit substitutes by banning interest, yield, or rewards on these tokens. The lobby views this as a necessary firewall to protect the traditional banking system from a liquidity shock.

The Flow Reality: $10.2T in Stablecoin Volume

The bank's fear of a $6 trillion deposit flight contrasts sharply with the actual scale of the stablecoin market. The global circulating supply is already over $272 billion, and adjusted transaction volume hit about $10.2 trillion in the last year. This isn't just speculative trading; it's a real utility layer for payments and DeFi activity that operates at a scale banks can't ignore.

The competitive dynamic is clear. The U.S. 3-month Treasury yield was around 3.67% on January 29, 2026. Any stablecoin yield above that level is typically financed by active borrow demand or strategic incentives, not free money. Crypto firms argue this yield is a necessary feature for a nascent industry to attract capital and innovate, making it a core competitive advantage.

Banning this yield would likely push activity overseas, not stop it. History shows over-regulation often backfires, as seen with money market funds emerging to meet demand despite bank lobbying. A ban could force stablecoin yield into less transparent, harder-to-regulate corners, undermining the very financial stability banks claim to protect.

Catalysts and Flow Implications

The immediate regulatory catalyst is a White House-hosted meeting scheduled for Tuesday. This second industry gathering aims to broker a deal on stablecoin yields, with a push to strike an agreement by month's end. The stakes are high, as the outcome will directly shape the future of the Clarity Act legislation, which is stalled in the Senate Banking Committee.

A ban on yields would likely limit U.S. adoption and competitiveness. Foreign digital currencies, like China's digital yuan, already offer yield, putting the U.S. dollar at a disadvantage. This regulatory friction could shift innovation and capital flows to more bank-friendly regulatory havens, undermining the U.S. position in the global digital finance race.

The key flow metric to watch is whether stablecoin transaction volume and supply continue to grow despite this uncertainty. The market already operates at a massive scale, with adjusted transaction volume hitting about $10.2 trillion in the last year. If this growth trajectory persists, it signals that the utility and demand for these tokens are powerful enough to withstand regulatory pressure, making a complete ban an increasingly difficult sell.