The American Bankers Association (ABA) has raised concerns over a recent report by the White House Council of Economic Advisers (CEA) regarding stablecoin payments. According to BlockBeats, the ABA's chief economist and other experts argue that the CEA's study poses misleading questions that could misguide policymakers.

The CEA report primarily examines the impact of prohibiting stablecoin payments on bank lending, concluding that such a ban would only increase bank loans by approximately $1.2 billion, a minimal effect. However, the ABA contends that the real policy concern lies not in the consequences of a ban but in the risks associated with allowing stablecoin payments.

The ABA highlights the potential for accelerated deposit outflows, as allowing stablecoin payments could incentivize households and businesses to shift funds from bank deposits, particularly from community banks, to stablecoins. This shift could have significant effects if the market grows to $1-2 trillion, with loan reductions in places like Iowa potentially ranging from $4.4 billion to $8.7 billion.

Community banks could face challenges due to deposit outflows, forcing them to rely on more expensive wholesale funding, such as Federal Home Loan Bank advances, thereby increasing their funding costs and reducing loans to local families and small businesses.

The CEA suggests that deposits would merely be reshuffled within the banking system, with minimal overall impact. However, the ABA argues that deposits moving from community banks to a few large institutions or stablecoin reserve accounts could harm sectors dependent on relationship-based banking.

The ABA believes that prohibiting stablecoin payments is a prudent protective measure, allowing stablecoins to mature as a payment innovation tool without becoming a source of economic risk by replacing insured deposits.