The American Bankers Association (ABA) has declared banning yields on payment stablecoins its number-one priority for 2026, fearing a deposit exodus that could cripple lending.

ABA’s Stand

In a stark policy blueprint released this week, the ABA (representing over 2,000 banks) urged Congress to slam the door on interest, rewards, or yields from payment stablecoins. CEO Rob Nichols framed it as safeguarding community banks from "deposit substitutes" that threaten trillions in funding. This tops a hit list including fraud crackdowns and rejecting rate caps, shaped by feedback from banks big and small. Bank of America CEO Brian Moynihan echoed the alarm, warning yield-bearing tokens could siphon deposits, slashing lending power amid already tight margins. Over 3,200 bankers signed a Senate letter last week demanding closure of the "interest loophole" in last year's GENIUS Act.

Stablecoin Surge Fuels Fears

Stablecoins now boast a market cap eyeing $2 trillion by 2025 end, up from $300 billion in 2024, powering $4 trillion+ in annual volume. USDT and USDC dominate at $187 billion and $76 billion, but yield variants like Ethena's USDe (offering 20%+ APY via hedging) and Ondo Finance's USDY lure users with returns banks can't match post-rate hikes. DeFi TVL hit $124 billion, with stablecoin staking exploding 150% YoY. Projections see stablecoins as global finance's backbone, hitting $1 trillion TVL inflection. Crypto's on-chain volume rivals Visa, but banks see yields as the killer app diverting insured deposits.​

Crypto Clash and Regulatory Drama

Coinbase pulled support from a Senate market structure bill after bank-backed yield curbs were inserted, stalling markup. Critics argue it tilts the field, hobbling wallets and DeFi while banks hoard data via open banking tweaks. Yet 2026 rules loom: GENIUS Act mandates Treasury/FDIC stablecoin regs by July, live January 2027. Trump's pro-crypto tilt clashes with bank muscle, as senators unveil frameworks balancing innovation and stability.

What's at Stake for Markets?

If banks prevail, yield-free stablecoins lose edge, boosting bank deposits but slowing crypto's payment revolution. Bulls eye $2T cap regardless; bears warn of innovation chill. With ETFs at $50B inflows and adoption soaring (28% U.S. adults own crypto), this battle defines finance's future.