The prohibition on yield-bearing stablecoins in the CLARITY Act puts the US dollar at a competitive disadvantage to China’s Digital Yuan, a yield-bearing central bank digital currency, according to Anthony Scaramucci, founder of asset manager SkyBridge Capital.
“The whole system is broken,” Scaramucci said in response to the prohibition on crypto exchanges and service providers offering customers yield on stablecoins in the CLARITY Act, a crypto market structure framework for the US. He asked:
“The Banks do not want the competition from the stablecoin issuers, so they’re blocking the yield. In the meantime, the Chinese are issuing yield, so what do you think the emerging countries will choose as a rail system, the one with or without yield?”
The CLARITY Act. Source: United States Congress
The People’s Bank of China, the country’s central bank, began allowing commercial banks to pay interest on digital yuan deposits in January.
Brian Armstrong, the CEO of crypto exchange Coinbase, warned that prohibiting yield on US stablecoins undermines the dollar by making it less competitive than the Digital Yuan in foreign exchange markets.
“I worry we are missing the forest through the trees in the US. Rewards on stablecoins will not change lending one bit, but it does have a big impact on whether US stablecoins are competitive,” Armstrong said.
Source: Brian Armstrong
The ban on yield-bearing stablecoins is a core pain point voiced by Armstrong and other crypto industry executives, who say the ban on stablecoin yield was introduced to choke off competition to protect the incumbent banking industry.
Related: Stablecoin rewards provisions face industry test in Senate crypto bill
Bank of America CEO warns stablecoins can lead to $6 trillion exodus from bank accounts
The CLARITY Act expanded the scope of the prohibition on yield-bearing stablecoins introduced in The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, a regulatory framework for US dollar stablecoins.
During an earnings call on Wednesday, Bank of America CEO Brian Moynihan said that stablecoins could lead to $6 trillion in bank deposit outflows.
The flight of customer deposits held in traditional banks could reduce the banking industry’s lending capacity, Moynihan said.
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