Trump's crypto advisor says stablecoins will drive global deposits into US banking system

The ongoing debate over stablecoin yields may be overlooking a broader macroeconomic dynamic, according to Patrick Witt, the executive director of the President's Council of Advisors for Digital Assets.

In a Wednesday post on X, Witt argued that stablecoins compliant with the GENIUS Act framework could actually drive new capital into the U.S. banking system — rather than siphoning deposits away from it, as some banking groups have warned.

"Lost in the rewards/yield debate is how GENIUS-compliant stablecoins will actually lead to deposit inflows," Witt wrote. "Global demand for USD is massive. Foreigners exchange local currency for stablecoins from a US-based issuer. That is net new capital entering the American banking system."

Witt's comment comes as policymakers, banks, and crypto firms continue to clash over whether stablecoin issuers should be permitted to offer rewards or interest-like incentives to holders.

Deposit concerns

Traditional banking groups have warned that yield-bearing stablecoins could drain deposits from the U.S. banking system. 

A recent survey commissioned by the American Bankers Association found that consumers broadly supported restrictions on stablecoin rewards, citing concerns about financial risk.

"Our industry welcomes competition and innovation," ABA President and CEO Rob Nichols said earlier this week. However, he warned that regulators should avoid creating "an uneven playing field" where crypto firms provide bank-like products without complying with equivalent regulatory standards.

Crypto industry advocates have pushed back on that characterization. They argued that stablecoin issuers already face strict reserve requirements under the GENIUS Act, which mandates tokens to be fully backed by cash or cash-equivalent assets.

Witt also addressed similar concerns earlier this month. "[It] is not the paying of yield on a balance per se that necessitates bank-like regulations, but rather the lending out or rehypothecation of the dollars that make up the underlying balance," Witt said. "The GENIUS Act explicitly forbids stablecoin issuers from doing the latter." 

Delays

The stablecoin yield debate remains a key obstacle for the broader crypto market structure legislation, including the Clarity Act.

Talks between banks and crypto firms over stablecoin rewards have not reached a compromise, despite the passage of the GENIUS Act, which created a federal regulatory framework for payment stablecoins.

President Donald Trump also weighed in earlier this month. "The Genius Act was the U.S.A.'s first big step to make the United States the crypto capital of the world, and getting the Clarity Act done is the next step to finish the job," Trump said in a post on Truth Social.

To address the impasse, the White House has recently convened closed-door meetings with crypto and banking executives. Participants have said the meetings were productive, but bank representatives maintain a rigid stance against stablecoin rewards.