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No progress has been made recently on the delayed CLARITY Act, the crypto market structure bill, primarily due to opposition from the banking sector over stablecoin rewards. Despite this stalemate, White House Crypto Advisor Patrick Witt has been vocal in advocating for the bill’s passage.
Witt Calls Out Banks For Undermining Crypto Progress
In a social media post on Tuesday, Witt emphasized the importance of keeping the CLARITY Act a pro-innovation piece of legislation. He criticized efforts to co-opt the legislative process into an anti-competition framework, labeling such actions as “shameful.”
His comments echo President Donald Trump’s recent support for the cryptocurrency industry, in which Trump alleged that banks are attempting to undermine both the overarching crypto framework and the GENIUS Act, signed last year.
The President accused financial institutions, despite their record profits, of resisting policies that aim to create greater opportunities within the digital asset sector.
However, on Wednesday, Witt intensified his criticism of the banking sector’s opposition to stablecoin rewards, stating:
Arguably my favorite part of this rewards/yield debate has been when bankers say, ‘if we allow this, then we’ll see massive deposit flight.’ Crypto has already been offering rewards/yield on stablecoins FOR YEARS. Where is the deposit flight? Is it in the room with us right now?
CLARITY Act In Jeopardy?
The traditional banking sector contends that stablecoin products offering rewards could siphon deposits from traditional banking institutions, ultimately diminishing the funds available for local lending activities.
In response, crypto executives have been defending the concept of consumer choice and the benefits of open competition. Some contend that restrictions on stablecoin rewards would disproportionately protect bank profit models while limiting individuals’ control over their finances.
Witt has previously stated that a lack of compromise on the CLARITY Act equates to no restrictions on intermediaries providing stablecoin rewards. He added, “If you believe the banks’ argument about deposit flight, this would be catastrophic.”However, the CLARITY Act faces additional unresolved challenges.
Some Democratic senators are pushing for stronger anti-money laundering (AML) safeguards, measures addressing alleged risks associated with decentralized finance (DeFi), and tighter restrictions on personal crypto holdings for senior government officials.
While the Senate Agriculture Committee has approved its section of the bill, ongoing discussions within the Senate Banking Committee aim to address these remaining issues. As of now, it remains uncertain when a compromise will be reached, leaving the future of the CLARITY Act hanging in the balance.
Featured image from OpenArt, chart from TradingView.com
