White House crypto adviser Patrick Witt has blamed major U.S. banks for the opposition that helped derail the CLARITY Act, arguing that concerns over stablecoins and their potential pressure on bank deposits originated with the country's largest financial institutions before spreading to smaller community banks.

According to data shared by Coin Bureau on X, Witt described the opposition to the legislation as “a wildfire that was started by larger banks that ultimately spread to community banks.” His comments came amid a broader dispute over provisions governing stablecoins and financial ethics in the proposed crypto market-structure legislation.

The CLARITY Act, which cleared the House in July 2025, was designed to establish a federal framework for digital-asset markets by dividing oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission. The bill ultimately failed to advance in the Senate, however, after running into disagreements over stablecoin rewards as well as ethics provisions involving President Donald Trump's cryptocurrency-related financial interests. Its stalled progress leaves digital-asset firms without the market-structure clarity the legislation was intended to provide.

Stablecoin Deposit Concerns

The dispute involving banks has centered in part on whether stablecoins offering rewards to holders could compete with traditional bank deposits—an issue at the intersection of the digital-asset industry's growth and the banking sector's core funding base.

The White House has previously argued that concerns about deposit outflows need to be assessed against how stablecoin reserves are structured. A September White House analysis said the administration's economic analysis found that prohibiting stablecoin yield would increase bank lending by about $2.1 billion, equivalent to 0.02% of bank loans, under its modeled assumptions.

Banking groups, however, have argued that stablecoin rewards could encourage customers to move funds away from traditional deposit accounts. CoinDesk reported that banking associations raised concerns about “deposit flight and diminished credit and lending” with permitting yield on payment stablecoins.

Witt has previously taken the opposite view, arguing that stablecoins could bring additional capital into the U.S. banking system rather than simply removing deposits. In March, he said that stablecoins compliant with the GENIUS Act framework could lead to deposit inflows. The GENIUS Act, signed into law in July 2025, established the first federal regime for payment stablecoins and bars issuers from paying yield to holders—a restriction that has kept the rewards question at the center of the broader market-structure debate.

Trump Ethics Provisions Add to Dispute

Negotiations over the CLARITY Act also became closely tied to questions surrounding President Trump's personal crypto holdings.

Witt said Trump had been willing to divest his crypto assets or place them in a blind trust. He described the provision as “the most restrictive ethics provision that has ever been agreed to by any president.”

The ethics debate became a central issue in negotiations over the legislation. CoinDesk reported that Trump accepted additional restrictions that could require his investments to be placed into blind trusts or otherwise subjected to new limits.

Witt also criticized the attacks directed at Trump over the issue, calling them “somewhat ironic.” He pointed to what he described as “a lot of senators on banking committees” who actively trade stocks in the financial companies they regulate.

The comments reflect the competing concerns that shaped the final stages of the CLARITY Act debate: banking groups focused on the potential effects of stablecoins on deposits, while lawmakers and others pressed for restrictions addressing potential conflicts of interest involving federal officials and financial markets.

The Senate ultimately failed to advance the legislation after a procedural vote fell short of the threshold required to move forward, leaving the proposed market-structure framework stalled. Any renewed effort would have to navigate the same two sticking points—the treatment of stablecoin rewards and the handling of potential conflicts of interest involving federal officials—that defined this round of negotiations.