Stablecoin yields will bring fresh money to US banks: White House's Witt

Global demand for the US dollar is “massive,” and stablecoin yields will only bring more interest to the currency, argued the White House crypto chief.

Stablecoin yield providers will inject more capital into the US banking system, argues White House Council of Advisors for Digital Assets executive director Patrick Witt, amid debate over whether stablecoin yields will draw deposits away. 

“Foreigners exchange local currency for stablecoins from a US-based issuer,” Witt said in an X post on Wednesday, adding that “global demand for USD is massive.”

“That is net new capital entering the American banking system,” Witt said. Most US stablecoin issuers hold US dollars or US Treasuries to back each token issued.

The US dollar index, which tracks the strength of the dollar against a basket of major currencies, fell to its lowest level in four years on Jan. 28, at 95.818, according to TradingView. It has since recovered 3.80% to 99.468.

It comes as the debate between crypto firms and US banks continues to heat up over the US CLARITY Act, aimed at providing the industry with clearer regulation, over whether allowing stablecoin yields will pull deposits out of traditional banks.

Major US bank Standard Chartered recently estimated in a research note that increasing stablecoin adoption could lead to US bank deposits decreasing “by one-third of stablecoin market cap.”

However, Witt argued that what’s often “lost” in the GENIUS and CLARITY Act discussions is how GENIUS-compliant stablecoins “will actually lead to deposit inflows.” 

On Friday, the Independent Bankers Association of Texas president Christopher Williston said that making concessions in the CLARITY Act debate would risk harming local lending and economic production, prompting backlash from the crypto community. 

“It's simply impossible to roll over in the fight for liquidity that powers the economies of the places we call home,” he said.

Related: Republican opposition to CBDC could hold up housing affordability bill

Zero Knowledge Consulting founder Austin Campbell responded that “If community banks and crypto can't find a way to work together, we already know who the winners are… It is the big banks.”

Witt also chimed in on this debate, saying it “feels like I’m watching an arsonist threaten to burn down their own home.”

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Source: CoinTelegraph