Anthony Scaramucci, founder of asset manager SkyBridge Capital, has stated that the prohibition on yield-bearing stablecoins within the CLARITY Act places the US dollar at a competitive disadvantage compared to China’s Digital Yuan, which is a yield-bearing central bank digital currency.
“The whole system is broken,” Scaramucci remarked 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 questioned the rationale behind the ban, stating:
“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 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, has voiced concerns 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 stated.
The ban on yield-bearing stablecoins is a significant point of contention for Armstrong and other crypto industry executives. They argue that the ban was implemented to stifle competition and protect the established banking industry.
CLARITY Act Expands Stablecoin Yield Prohibition
The CLARITY Act broadens the scope of the prohibition on yield-bearing stablecoins that was initially introduced in The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act. The GENIUS Act was a proposed regulatory framework specifically for US dollar stablecoins.
During a recent earnings call, Bank of America CEO Brian Moynihan warned that stablecoins could potentially lead to significant outflows from traditional bank accounts, estimating the figure to be as high as $6 trillion.
Moynihan indicated that such a flight of customer deposits from traditional banks could diminish the lending capacity of the banking industry.