Where Money Goes If Yield Is Banned

The traditional banking model faces an existential threat from high-yield stablecoins, prompting a coordinated legislative effort to protect the legacy financial system's "net interest margin." While major U.S. banks generated over $262 billion in interest revenue in 2025 by paying depositors a mere 0.4%, stablecoins offer a technologically superior 100% reserve model capable of passing 4-7% yields directly to users. In response, the banking lobby is pushing for Section 404 of the Digital Asset Market Clarity Act to criminalize the distribution of yield to stablecoin holders. This regulatory capture aims to prevent a projected $6.6 trillion deposit flight from commercial banks. However, judicial precedents regarding autonomous smart contracts suggest that such bans may ultimately fail, as capital is likely to migrate toward permissionless DeFi protocols like Aave or offshore exchanges that remain beyond the reach of U.S. cease-and-desist orders.