Patrick Witt hits back at 134 bank leaders over CLARITY Act
White House crypto adviser Patrick Witt criticized banking leaders seeking tighter stablecoin reward restrictions as Senate delays pushed the CLARITY Act’s passage odds to a record low.
- 134 banking executives and leaders urged senators to expand restrictions on stablecoin rewards and incentives.
- Witt accused banks of opposing legislation that already prohibits stablecoin issuers from paying interest.
- Polymarket traders cut the bill’s 2026 passage odds to a record-low 27%.
- Senate scheduling decisions have narrowed the window for action before the Aug. 8 recess.
Patrick Witt challenges banks over CLARITY Act
Witt pushed back after 134 banking executives and industry leaders sent Senate lawmakers a letter seeking changes to Section 10404 of the CLARITY Act.
The section restricts issuers from paying interest or yield on payment stablecoins. Banking groups want lawmakers to extend the restriction to rewards, bonuses and other incentives offered by stablecoin firms or their partners.
Witt framed the request as inconsistent with the industry’s wider opposition to the market structure bill.
“Banks: We must ban the payment of interest on stablecoins to protect community bank lending!.”
He then noted that the CLARITY Act already bans interest payments before criticizing banks that still warn the bill could damage community lending.
His comments targeted the difference between banks’ support for an interest ban and their objections to other parts of the legislation. Bank representatives maintain that the existing language may leave room for stablecoin platforms to offer benefits with the same economic effect as interest.
Why banks want a wider stablecoin reward ban
Signatories included leaders 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.
The group said payment stablecoins should function as transaction tools rather than long-term savings products. It warned that rewards linked to a user’s balance or holding period could encourage customers to move money out of insured bank accounts.
Banking leaders claimed that large deposit outflows could reduce the funding available for lending to households, farmers, small businesses and local employers. They estimated that the effect could drain hundreds of billions of dollars from the traditional banking system.
Goldman Sachs CEO David Solomon has taken a different position by supporting the CLARITY Act. His stance separates the investment bank from groups demanding tighter stablecoin provisions before the Senate moves forward.
The debate has direct implications for US stablecoin users. Broader restrictions could limit the rewards that exchanges and other service providers offer, even when stablecoin issuers do not pay interest directly.
CLARITY Act odds fall to a record-low 27%
The banking dispute comes as the CLARITY Act faces a shrinking Senate calendar. Polymarket traders have reduced the probability that the legislation becomes law in 2026 to 27%, its lowest recorded level.
Galaxy Digital has separately lowered its passage estimate to 30% as negotiations extend deeper into the legislative year.
Senate Republicans recently released an updated 616-page draft combining texts from the Senate Banking and Agriculture committees. The framework would place digital commodity spot markets under the Commodity Futures Trading Commission while allowing the Securities and Exchange Commission to oversee investment contract assets.
It also includes protections for certain software developers, blockchain developers and decentralized networks that do not control customer assets. White House-backed ethics provisions would restrict digital asset issuance involving federal officials and their spouses.
Senate delay leaves little time before recess
Senate Majority Leader John Thune postponed CLARITY Act action while lawmakers considered federal nominees and the Lindsey O. Graham Sanctioning Russia Act of 2026. Senators voted on July 28 to advance the sanctions package, leaving fewer working days before the Aug. 8 recess.
Crypto industry participants have urged Thune to begin the cloture process before lawmakers leave Washington, even if a final vote cannot occur. A procedural vote would test whether the bill has enough bipartisan support to overcome Senate hurdles later in 2026.
Failure to begin that process would push the legislation further into an already crowded calendar. Stablecoin reward rules remain one of the issues lawmakers must resolve before the broader US crypto market structure framework can advance.
