‘Attempts to hijack the CLARITY Act are shameful’: Trump advisor slams banks

The White House continues to express disappointment with the banking lobby’s hardline against the crypto market structure bill, the CLARITY Act. 

The two industries, the crypto and banking sectors, have failed to reach an amicable agreement on stablecoin rewards. The stablecoin rewards issue has stalled the bill’s progress since early this year.

At a recent bankers’ summit in Washington, the industry maintained a hardline stance against any compromise on the bill, prompting criticism from the White House. 

In response, Trump’s crypto advisor, Patrick Witt, said, 

“The CLARITY Act must remain a pro-innovation piece of legislation. Attempts to hijack the legislative process and turn it into an anti-competition bill are shameful.”

Bankers’ plea

Witt’s statement followed Rob Nichols, president of the American Bankers Association, an advocacy group, who framed the current dispute as ‘anti-competitive.’

During the Washington summit, Nichols cautioned, 

“Our industry welcomes competition and innovation…what we don’t support is an uneven playing field.”

Since last year, the traditional banking sector has maintained that stablecoin rewards will lead to deposit flight and harm the financial system.

The industry argues that the U.S. stablecoin law, the GENIUS Act, created a loophole that allows intermediaries to share yield with users, thereby bypassing the direct reward ban imposed on issuers.  

To mitigate this, banks want the ban extended to intermediaries as well. This would mean amending the GENIUS Act or imposing the ban in the CLARITY Act. 

However, stablecoin issuers view this as a threat to their business model. In fact, beyond disrupting their model, supporters view stablecoin yield as a national security issue, citing China’s push in the sector with rewards for digital yuan. 

Proposed CLARITY Act compromise

Senators have tried to bring the two sides into a compromise on the issue.

During the banks’ summit, Democrat Senator for Maryland, Angela Alsobrooks, stressed that each faction will be ‘just a little bit unhappy’ but will help push for clear rules for the sector. 

“We absolutely have to have these protections to prevent the deposit flight, but we’re going to probably have to make some compromises.”

Congressional Research Service (CRS) estimates that the stablecoin yield could reduce bank lending by $65 billion to $1.26 trillion, because the GENIUS Act prohibits lending of stablecoin reserves. The CRS urged banks to offer higher interest rates to depositors to remain competitive. 

The compromise lawmakers have been pushing for is to narrow the types of stablecoin activity crypto platforms can allow to receive stablecoin rewards. 

However, the banks’ opposition has faced a series of criticisms from the White House for the past few days. As such, the path forward for the CLARITY Act remains uncertain unless the concerned stakeholders resolve the stablecoin yield issue. 

Final Summary

• White House slammed banks for framing the CLARITY Act as an ‘anti-competition’ bill. 
• The banking industry reiterated its concerns about stablecoin yields during a recent meeting.