White House Adviser Blames Big Banks for CLARITY Act Opposition

White House crypto adviser Patrick Witt has blamed major U.S. banks for opposition that helped derail the CLARITY Act, arguing that concerns over stablecoins and potential pressure on bank deposits spread from large financial institutions to community banks.

According to data shared by Coin Bureau on X, Witt said opposition to the legislation was “a wildfire that was started by larger banks that ultimately spread to community banks.” His comments came amid a broader dispute over provisions governing stablecoins and financial ethics in the proposed crypto market-structure legislation.

The CLARITY Act was designed to establish a federal framework for digital-asset markets but ultimately failed to advance in the Senate. The legislation faced disagreements over stablecoin rewards as well as ethics provisions involving President Donald Trump’s cryptocurrency-related financial interests.

Stablecoin Deposit Concerns

The dispute involving banks has centered in part on whether stablecoins offering rewards could compete with traditional bank deposits.

The White House has previously argued that concerns about deposit outflows need to be assessed against how stablecoin reserves are structured. A September White House analysis said the administration’s economic analysis found that prohibiting stablecoin yield would increase bank lending by about $2.1 billion, equivalent to 0.02% of bank loans, under its modeled assumptions.

Banking groups, however, have argued that stablecoin rewards could encourage customers to move funds away from traditional deposit accounts. CoinDesk reported that banking associations raised concerns about “deposit flight and diminished credit and lending” associated with permitting yield on payment stablecoins.

Witt has previously taken the opposite view, arguing that stablecoins could bring additional capital into the U.S. banking system rather than simply removing deposits. In March, he said that stablecoins compliant with the GENIUS Act framework could lead to deposit inflows.

Trump Ethics Provisions Add to Dispute

The CLARITY Act negotiations also became closely tied to questions surrounding Trump’s crypto holdings.

Witt said Trump had been willing to divest his crypto assets or place them in a blind trust. He described the provision as “the most restrictive ethics provision that has ever been agreed to by any president.”

The ethics debate became a central issue in negotiations over the legislation. CoinDesk reported that Trump accepted additional restrictions that could require his investments to be placed into blind trusts or otherwise subjected to new limits.

Witt also criticized attacks directed at Trump over the issue, calling them “somewhat ironic.” He pointed to what he described as “a lot of senators on banking committees” who actively trade stocks in financial companies they regulate.

The comments reflect the competing concerns that shaped the final stages of the CLARITY Act debate: banking groups focused on the potential effects of stablecoins on deposits, while lawmakers and others pressed for restrictions addressing potential markets conflicts of interest involving federal officials.

The Senate ultimately failed to advance the legislation after a procedural vote fell short of the threshold required to move forward.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.