A senior White House crypto policy adviser said this week that the ability of cryptocurrency platforms to offer yield on stablecoins does not pose a fundamental threat to the U.S. banking system, comments that come amid a tense standoff over digital‑asset legislation in Congress.
Patrick Witt, a crypto policy adviser, said banks and crypto firms can coexist and even benefit from each other as digital finance evolves. He emphasized that stablecoin yields—rewards paid to holders—should not be viewed as a threat to banks. Instead, Witt noted that both sectors have opportunities to innovate and offer comparable services.
Witt said in an interview that the debate has become more heated than necessary. “Unfortunately,” he said, “that stablecoin yields have become a major point of disagreement between crypto firms and banks.”
Banks can offer similar products and remain competitive
The debate sits at the heart of Congress’s ongoing effort to pass the CLARITY Act, a high‑profile bill aimed at defining regulatory jurisdiction over cryptocurrencies between the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission. The measure would also establish clearer market definitions for digital assets — including stablecoins.
Banks already have the tools and regulatory pathways to produce similar products, Witt said. Banks can offer stablecoin services like crypto platforms do, meaning they are not at a disadvantage. Many banks are already turning that way, he said. Others are seeking charters with the Office of the Comptroller of the Currency to offer services related to digital assets.
Such charters give banks the legal authority to provide financial products and services, including stablecoins and their derivatives. Banks have been challenged more than ever to get out of the market, and thus, this proves they aren’t being forced out. Instead, they are adapting to new technology and exploring new ways to expand their services.
Witt is convinced that stablecoins may enable banks to reach new customers and develop novel financial products. He said that tomorrow is more about cooperation than conflict and remains optimistic that stablecoins will help banks find solutions to improve payments, cut costs, and provide faster services. He added that banks would use stablecoins as a competitive advantage rather than treating them as competitors. As much as Witt sees stablecoins as a game on tap, the same can be said for stablecoin yields.
Stablecoin yields have become one of the most contentious issues in crypto regulation, introducing new complexities that Witt describes as a “twist on an open road.” Crypto firms typically share earnings from reserve assets with stablecoin holders, effectively paying interest. This practice has raised concerns among regulators and traditional financial institutions. The debate over these rewards has also slowed progress on new legislation, including the proposed CLARITY Act.
Political uncertainty threatens crypto legislation progress
The CLARITY Act is expected to establish the rules for controlling digital assets in the U.S. It would clarify which regulator is responsible for each type of crypto asset. Under the legislation, the Securities and Exchange Commission and Commodity Futures Trading Commission would have clearly defined roles.
Scott Bessent, the head of the U.S. Treasury, said there is only a short period to finalize a deal. He cautioned that if political power changes hands in Congress, crypto legislation might be held up or undone. The crypto regulatory framework that’s in development is one element of a broader financial strategy under President Donald Trump’s administration.
At the start of election season, lawmakers may have their sights set more on campaigning than they do new legislation. Observers caution that the current opening to develop clear crypto rules will not be open forever. Delaying action might make the process far more challenging. Still, Witt remains optimistic about reaching a consensus.
Source: https://www.cryptopolitan.com/stablecoin-yields-dont-threaten-banks/
