Advocates: White House rigged stablecoin analysis

Americans for Financial Reform Education Fund and Duke University lecturing fellow Lee Reiners published a 28-page report on May 5 titled “A Model Built to Mislead,” which accuses the White House Council of Economic Advisers of structuring its stablecoin yield analysis to reach a predetermined conclusion and of understating deposit losses at community banks.

The CEA’s study concluded that stablecoin yield would have only minimal effects on bank deposits and local lending. The AFR-Reiners report challenges that finding, arguing the CEA used assumptions that downplay how deposit flows could shift as the stablecoin market grows and that it overlooked industry behaviors and reserve-management risks.

The report identifies four core problems with the CEA analysis. First, it contends the CEA did not account for how larger stablecoin market sizes could produce proportionally greater displacement of bank deposits. The paper notes the stablecoin market reached $321 billion in April 2026 and argues the CEA’s deposit-displacement estimates are likely too small at that scale.

Second, the report says the CEA minimized documented industry practices of offering higher, riskier returns through staking, lending and other yield arrangements. The paper argues those practices have repeatedly drawn regulatory and legal scrutiny and could drive customer fund flows away from banks.

Third, AFR and Reiners contend stablecoin issuers’ reserve strategies — including holdings of U.S. Treasuries and use of reverse repurchase agreements — could pull deposits from community banks that rely on those deposits to fund local loans.

Fourth, the report raises concern about concentration of reserves in money market funds and on the Federal Reserve’s balance sheet via reverse repos, warning that those concentrations create channels of systemic vulnerability not addressed in the CEA study.

The report takes aim at recent legislative negotiations. Senators Thom Tillis and Angela Alsobrooks released revised CLARITY Act text that bans yield economically equivalent to bank deposit interest while permitting activity-based rewards tied to platform use. AFR calls that compromise insufficient, arguing activity-based programs could be relabeled or used to support leveraged positions that would displace deposits.

In the report, Lee Reiners wrote, “The CEA’s analysis is deeply flawed and understates the impact of stablecoin growth on the financial system. More importantly, it reflects a broader pattern of questionable assumptions, foregone conclusions, and conflicts of interest at the CEA under President Trump.” Mark Hays, AFR’s associate director for crypto and fintech policy and a co-author, wrote, “Crypto billionaires have repeatedly tried to gain preferential treatment that further enriches them, regardless of the risks and threats to household economic security and financial stability. It will hurt all of the rest of us if they get away with it.”

AFR directed the release at members of the Senate Banking Committee, where a markup was scheduled for the week of May 11, 2026. The report presents an alternative economic analysis that disputes the CEA’s conclusions and urges tighter limits on stablecoin yield than those in the Tillis-Alsobrooks text.

Supporters of permitting certain forms of stablecoin yield have argued that activity-based rewards encourage platform use and innovation without replicating bank deposit interest. The CEA study reached a similar conclusion about limited effects on deposits and community lending. The AFR report lays out scenarios in which stablecoin issuers expand reserve holdings in Treasury and reverse-repo markets and users shift funds away from community banks, and it asks lawmakers to consider those scenarios when drafting legislation.