Banks Tell Senators Stablecoin Rewards Are Too Tempting; Crypto Adviser Yawns 🏦

Patrick Witt, the White House crypto adviser, criticized U.S. banks on Thursday after 134 banking executives and leaders urged the Senate to broaden the CLARITY Act's restrictions on stablecoin rewards, bonuses, and interest-like incentives. The dispute centers on Section 10404 of the bill, which already bans direct interest payments on payment stablecoins. Witt said banks are opposing a measure that already delivers the very ban they are requesting.

The banking coalition, whose signatories included executives tied to Bank of America, U.S. Bank, Zions Bank, First Hawaiian Bank, Bank of Hawaii, Hancock Whitney Bank, FNBO, Eastern Bank, Lake City Bank, and Univest Financial Corporation, asked Senate leaders to tighten language covering reward structures. The group warned that firms could design benefits whose economic effect mirrors interest. The letter argued that payment stablecoins should function as transactional tools and resisted their use as long-term holding products, contending that balance- or duration-based rewards could pull funds from bank deposits and erode the deposit base that funds local lending to households, small businesses, farmers, and employers.

The lobbying push lands as Senate Republicans work within a tight window before the August recess. Lawmakers are simultaneously reviewing the stablecoin provisions and addressing ethics requirements attached to the package. Bank leaders have framed the deposit-outflow risk in quantitative terms, warning that potential reductions in deposit funding could reach into the hundreds of billions of dollars and weaken community credit availability.

Witt countered the bank position by pointing to the existing Section 10404 prohibition on interest, saying institutions were demanding stricter guardrails than the statute already provides. He framed the campaign as evidence of institutional resistance to legislated competition rather than a technical clarification request, while reiterating support for clear consumer protections and a transparent regulatory perimeter for compliant stablecoin issuers.

The CLARITY Act remains under Senate committee review, with floor timing contingent on resolution of the rewards language and the accompanying ethics package before the chamber departs for the August recess.