TD Cowen says White House stablecoin report unlikely to change hurdles for crypto bill, sees even tougher path ahead

The recent White House report on stablecoins is unlikely to ease political hurdles for crypto legislation, investment bank TD Cowen said, adding that the path for the Clarity Act could become even more difficult.

The report, released by the White House Council of Economic Advisers on Wednesday, said prohibiting yield on stablecoins is unlikely to have a meaningful impact on bank lending. It said most stablecoin reserves flow back into the banking system, and only a small share is effectively removed from lending.

“At baseline calibration, eliminating stablecoin yield increases bank lending by $2.1 billion, which represents a net increase of 0.02% of total loans,” the report said. “Producing lending effects in the hundreds of billions requires simultaneously assuming the stablecoin share sextuples, all reserves shift into segregated deposits, and the Federal Reserve abandons its ample-reserves framework.”

The report aligns more closely with the crypto industry’s view than that of banks, which have argued that stablecoin rewards could lead to trillions in deposit outflows and impact lending activity.

TD Cowen said as long as banks continue to see stablecoins as a threat to deposits, they are likely to oppose crypto legislation unless it includes a clear ban on yield. The firm said the White House report is unlikely to convince small banks, which are expected to question both the assumptions and conclusions.

“It is why we do not see this study as changing the political obstacles to enactment of the Clarity Act on crypto market structure,” said Jaret Seiberg, managing director at TD Cowen’s Washington Research Group, in a Wednesday note. “As long as small banks view stablecoins as a threat to their future they will oppose crypto legislation unless it contains an explicit ban on stablecoin yield.”

The release of the report is still notable, Seiberg said, as it suggests the White House may support allowing stablecoin yield, which, however, could make compromise harder.

“It suggests to us that the President [Donald Trump] wants the Clarity Act to permit stablecoin yields. If that is the case, then it would suggest the potential compromise of permitting rewards for using stablecoins while banning yield for holding them on a platform will not ultimately win the President’s support. If that ends up being the case, then the path to enact Clarity is even tougher than we have been discussing,” Seiberg wrote.

Last week, Seiberg said he is “increasingly pessimistic” and sees only a one-in-three chance of the crypto bill passing this year. He has also said the bill may only pass if Congress moves forward without full agreement from both banks and crypto firms, which is not common.

Earlier this year, Seiberg also said the bill could be delayed to 2027, with final rules potentially taking effect in 2029 if political hurdles are not resolved this year.

The status of a potential compromise between the crypto and banking industries remains unclear. A final stablecoin yield legislative text was expected to be released publicly by senators last week, but there have been no updates so far, though parties are said to be still working toward a deal.

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