Witt to Banks: "Consumers Win When There Is Choice"
White House crypto adviser Patrick Witt delivered a pointed message to the banking industry this week: stablecoin yield is not your enemy, and the best response is competition, not prohibition.
Speaking to Yahoo Finance, Witt, the Executive Director of the President's Council of Advisors for Digital Assets, argued that banks should view stablecoin yield programs as an opportunity rather than an existential threat. His position is simple: crypto service providers sharing yield with customers does not undermine the banking industry's business model. Banks have the tools to build competing products, and many are already applying for OCC charters to do exactly that.
The comments arrive at a critical moment. The CLARITY Act, the most significant piece of crypto market structure legislation in years, is stalled in the Senate Banking Committee over this exact issue. The White House has set an end-of-February deadline for both sides to reach a compromise, and the clock is running out.
Why Wall Street Wants Stablecoin Yield Banned Entirely
The banking lobby's position is not subtle. The American Bankers Association and the Financial Services Forum, which represents the CEOs of the largest Wall Street banks, circulated a one-page document titled "Yield and Interest Prohibition Principles" that calls for a total ban on stablecoin yield.
Their argument: if stablecoin issuers like Circle or Tether pass yield back to holders, deposits will flow out of traditional banks and into crypto wallets. Since banks fund lending through deposits, a deposit drain could constrain credit availability across the economy.
This is not a hypothetical concern for them. Circle's USDC supply alone has crossed $73 billion, and the total stablecoin market now exceeds $230 billion. If even a fraction of those holdings started paying 4-5% yield to holders, the competitive pressure on bank savings accounts paying 0.5% would be real and immediate.
But Witt's counter is equally direct: banks can issue their own stablecoin products and compete on the same terms. The solution is not to ban innovation. It is to let both sectors serve consumers.
The CLARITY Act: What Is Actually at Stake
The Digital Asset Market Clarity Act is far bigger than the stablecoin yield question. The legislation aims to establish clear regulatory boundaries between the SEC and CFTC for crypto oversight, create a formal cryptocurrency asset taxonomy, and provide the legal framework that institutional capital has been waiting for.
Witt himself has noted the irony: "The Clarity Act isn't really about stablecoins." The yield debate has become a poison pill attached to a much broader legislative package that both sides nominally support.
The bill previously passed the House and cleared the Senate Agriculture Committee. Its next hurdle is the Senate Banking Committee, where the banking lobby holds significant influence. If banks refuse to budge on yield, the entire bill could die in committee.
Treasury Secretary Scott Bessent has warned that the approaching 2026 midterm elections could shut the window entirely. If Democrats retake the House, the political calculus changes dramatically, and the bill may not survive in its current form.
The Compromise That Almost Happened
On February 3, Patrick Witt convened a two-hour meeting in the White House Diplomatic Reception Room with representatives from both camps. On the crypto side: Coinbase, Circle, Ripple, Crypto.com, the Digital Chamber, the Blockchain Association, and the Crypto Council for Innovation. On the banking side: the American Bankers Association and the Financial Services Forum.
No agreement was reached. But the meeting did produce a framework for what a compromise could look like.
The Digital Chamber, led by CEO Cody Carbone, released a counter-proposal offering significant concessions. The crypto industry would accept a ban on interest payments for static stablecoin holdings, the type of passive yield that most directly competes with bank savings accounts. In exchange, the industry wants to preserve rewards tied to liquidity provision and ecosystem participation, such as staking and governance voting.
The industry also offered to support a two-year study on stablecoins' impact on bank deposits, provided that the study does not automatically trigger new regulations.
Carbone called it "a significant concession." Banks have not yet formally responded to the counter-proposal.
What This Means for Crypto Card Users
The outcome of this negotiation will directly shape how crypto card products evolve over the next several years. Many crypto card providers already offer stablecoin-adjacent features: the ability to hold USDC or USDT balances, earn yield on deposits before spending, or automatically convert stablecoin holdings at the point of sale.
If stablecoin yield survives the legislative process, expect card issuers to lean harder into yield-bearing wallet features. Providers like ether.fi, Nexo, and Crypto.com already blend earning and spending in a single product. Legal clarity would let them market these features openly without regulatory ambiguity.
If the banks win a total yield ban, the impact would be more nuanced. DeFi-native yield (from lending protocols, liquidity pools, staking) would likely remain untouched, since those mechanisms don't fit neatly into the "interest on deposits" framework. But centralized stablecoin issuers would lose the ability to share treasury yield with holders, which currently funds many of the perks crypto card users enjoy.
For users who fund their cards with stablecoins, the distinction matters. A yield ban would mean your USDC sitting in a card wallet earns nothing, while the same USDC in a DeFi protocol could still earn 4-8%. That creates an awkward incentive to keep funds in DeFi until the last possible moment before spending, which is exactly the kind of friction that good card products are supposed to eliminate.
The Bigger Picture: Trillions Waiting on the Sideline
Witt has repeatedly pointed to what he sees as the real prize: trillions of dollars in institutional capital sitting on the sidelines, waiting for regulatory clarity before entering crypto markets. The CLARITY Act is the key that unlocks that capital.
If the stablecoin yield fight kills the bill, the cost is not just lost yield for retail users. It is the indefinite delay of a regulatory framework that would bring institutional-grade custody, trading, and lending infrastructure into the crypto ecosystem. That infrastructure is what turns crypto from a speculative asset class into a functional financial system, one where cards, payments, and everyday spending can operate with the same legal certainty as traditional banking.
The end-of-February deadline is less than two weeks away. Another White House meeting is reportedly scheduled for this week. Whether banks show up ready to negotiate, or arrive with another demand for a total ban, will determine whether the most important piece of crypto legislation in years lives or dies over a fight about savings account interest rates.
FAQ
What is the CLARITY Act? The Digital Asset Market Clarity Act is a comprehensive crypto market structure bill that establishes regulatory boundaries between the SEC and CFTC, creates a cryptocurrency taxonomy, and provides legal frameworks for institutional participation. It passed the House and the Senate Agriculture Committee but is stalled in the Senate Banking Committee over the stablecoin yield dispute.
What does Patrick Witt want? Witt, the Executive Director of the President's Council of Advisors for Digital Assets, wants banks and the crypto industry to compromise on stablecoin yield so the broader CLARITY Act can move forward. He argues banks should compete with stablecoin products rather than ban them.
Would a stablecoin yield ban affect crypto cards? Yes. Many crypto card providers allow users to hold and earn on stablecoin balances before spending. A total yield ban would eliminate passive earning on centralized stablecoin holdings, though DeFi-native yield mechanisms would likely remain unaffected.
What is the crypto industry's compromise offer? The Digital Chamber proposed banning interest on static stablecoin holdings (similar to bank savings) while preserving rewards for liquidity provision, staking, and governance participation. They also offered to support a two-year study on deposit impacts.
Overview
White House crypto adviser Patrick Witt told banks they should compete with stablecoin yield products rather than lobby to ban them, as the CLARITY Act faces an end-of-February deadline. The banking lobby demands a total ban on stablecoin yield, while the crypto industry has offered a compromise that surrenders passive yield but preserves DeFi-style rewards. The outcome will shape whether crypto card users can earn on idle stablecoin balances and whether the broader market structure bill, which unlocks institutional capital, survives the Senate Banking Committee.
Recommended Reading
- Circle Prints $2.6 Billion in USDC in a Single Week as Stablecoin Supply Crosses $73 Billion
- The CLARITY Act Explained: What It Does, Why It Stalled, and What Happens Next
- Coinbase CEO Draws Red Line on GENIUS Act as Banks Push to Kill Stablecoin Yield
