This seems bad for 'stablecoins' given yield at a minimum offsets the real purchasing power loss due to inflation 

More like unstablecoins

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Yes - thats correct

But lets say a bank issues a stablecoin to their customers, their customers would now have to take those funds to a 3rd party to get yield. There are a surprisingly large number of people who keep larger sums in checking accounts earning 0.1% or less, so many won't do that - they might not even know they can do that

The digitization of the dollar privatizes treasury returns to issuers - which is ofc what issuers want

This just means the *issuer* of stablecoins can’t offer yield, right? You would still have the ability to get yield from defi, no?

It's called narrow banking. Matt Levine has discussed it in his newsletter few times.

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Makes sense if tradfis also become narrow banks across all their liquid assets: cash and stablecoins

But if it's just the stablecoin part then it's pure extractive greed on the issuers part, who no doubt lobbied for something like this to be included in the Act

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Yes and sadly they're winning on this front

But ser government needs this so they can print more, grow more and reduce debt % at the same time…

That was my initial thought too, but there isn't a Fed for stablecoin issuance. It could be any number of independent financial institutions - so the issue is more to to with what I wrote here

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That was my initial thought too, but there isn't a Fed for stablecoin issuance. It could be any number of independent financial institutions - so the issue is more to to with what I wrote here https://warpcast.com/vinayvasanji.eth/0x47f6e932

“issuer can’t pay interest or yield“ does that mean other “financial services” can?

that would make it analogous to the banks which can pay yield and the fed doesn’t

not sure I’m getting that right