🚨UPDATE: Early reactions in banking circles suggest the White House report missed the mark, according to a banking source I spoke with. The CEA analysis finds prohibiting stablecoin yield would do little to prevent deposit flight and only marginally increase lending. But bankers say this has never been about simply needing more deposits to lend. It’s about outflows, particularly from smaller institutions. The issue is more about how shifts in deposits shape how lending is funded, priced, and how stable it is over time. Community banks rely more heavily on stable retail deposits and have fewer funding alternatives. If funds migrate into stablecoins or larger institutions, they could feel the impact first, even if aggregate lending appears largely unchanged. Additionally, the source noted that deposits don’t move 1:1. While the report finds most stablecoin reserves recirculate into the banking system, bankers argue they don’t always come back in the same form. Losing stable retail funding can change how credit is funded and deployed, even if that shift doesn’t immediately show up in aggregate lending data. More to come on that front. Meanwhile, @coinbase Chief Policy Officer @faryarshirzad is doubling down, telling me the report is a net positive for banks: “The facts matter, and it’s good to see the Council of Economic Advisors confirm that stablecoins aren’t a threat to community banks,” he said. “Stablecoins are big win for consumers — and a big opportunity for banks. Rewards are critical to preserving those benefits.”(Eleanor Terrett)