Anthony Scaramucci and Brian Armstrong are arguing that the prohibition on stablecoin rewards is less about financial stability and more about protecting incumbent banks from competition. This stance suggests that such restrictions could potentially push emerging markets toward alternative monetary rails. These concerns arise as China continues to allow interest on digital yuan deposits.
Yield Ban Weakens Dollar Competitiveness
Anthony Scaramucci has warned that the prohibition on yield-bearing stablecoins within the United States’ proposed CLARITY Act could significantly weaken the global competitiveness of the US dollar. This warning comes at a time when China is accelerating the adoption of its own yield-bearing digital currency. Speaking in response to the legislation, Scaramucci argued that banning stablecoin rewards reflects deeper structural problems within the US financial system and risks ceding influence to rival monetary rails.
Scaramucci stated that the restriction on crypto exchanges and service providers offering yield on stablecoins, as proposed by the CLARITY Act, is designed to protect incumbent banks from competition rather than to safeguard financial stability. In his view, traditional banks are resisting stablecoin issuers because yield-bearing digital dollars could potentially draw deposits away from the established banking system.
He contrasted this approach with China’s strategy, posing the question of why emerging markets would opt for a payments and settlement rail that offers no yield when attractive alternatives exist. This comparison gained further urgency after the People’s Bank of China began allowing commercial banks to pay interest on digital yuan deposits in January, effectively making China’s central bank digital currency more appealing to savers and institutions.
Similar concerns have been voiced by Brian Armstrong, the chief executive of Coinbase. Armstrong warned that prohibiting yield on US-based stablecoins undermines the dollar’s position in foreign exchange markets by making it less competitive compared to China’s digital yuan. He argued that while stablecoin rewards would not materially alter lending dynamics, they would play a crucial role in determining whether dollar-denominated stablecoins can compete on an international level. Armstrong, along with other industry leaders, described the yield ban as a deliberate effort to stifle competition and shield the traditional banking sector.
The issue has become increasingly contentious as the CLARITY Act builds upon restrictions initially introduced in the GENIUS Act, which had outlined a regulatory framework for US dollar stablecoins. While lawmakers and regulators frame these measures as essential for protecting financial stability, critics contend that they risk stifling innovation during a period of intensifying global competition over digital money.
Bank of America CEO Brian Moynihan also commented during a recent earnings call that the widespread adoption of stablecoins could lead to as much as $6 trillion in deposit outflows from traditional banks. He warned that such a significant shift could greatly diminish the banking industry’s capacity to lend.