Stablecoin income providers will inject more capital into the US banking system, says White House Digital Assets Adviser Patrick Witt, amid debate over whether stablecoin yields will wipe out savings.
“Foreigners are swapping local currency for US-issued stablecoins,” Witt said in an X post on Wednesday, adding that “global demand for US dollars is high.”
“This is net new capital coming into the American banking system,” Witt said. Most US stablecoin issuers have US dollars or US Treasuries backing each token issued.
Banking and crypto industries clash over stablecoin yield
The U.S. dollar index, which tracks the dollar’s strength against a basket of major currencies, hit a four-year low of 95,818 on Jan. 28, according to TradingView. Since then it has recovered 3.80% to 99,468.
This comes amid a debate between crypto companies and US banks over the US CLARITY Act, which aims to provide the industry with clearer regulation, over whether allowing stablecoin mining will drive deposits away from traditional banks.
Major US bank Standard Chartered recently estimated in a research note that increased stablecoin adoption could lead to a decline in US bank deposits, which would reduce “a third of the stablecoin market capitalization”.
However, Witt argued that what is often “lost” in discussions of the GENIUS and CLARITY Act is how GENIUS-compliant stablecoins “actually lead to an influx of savings.”
A community banking executive is causing controversy in the crypto industry
Texas Independent Bankers Association President Christopher Williston said on Friday that a compromise in the CLARITY Act debate would risk harming local lending and economic output, prompting a backlash from the crypto community.
“It’s impossible to get bogged down in the fight for liquidity that powers the economies of the places we call home,” he said.
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Zero Knowledge Consulting founder Austin Campbell responded, “If public and crypto banks can’t find a way to work together, we already know who the winners are… It’s the big banks.”
Witt also weighed in on the controversy, saying “it’s like I’m watching a fire threaten to burn down my house.”
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