Trump Crypto Advisor: Compliant Stablecoins Will Bring Deposit Inflows to U.S. Banks, Not Outflows

Recently, presidential digital asset advisor Patrick Witt posted on X, pointing out that stablecoin regulatory frameworks compliant with the GENIUS Act will bring deposit inflows to the U.S. banking system, rather than the deposit outflows traditionally feared by the banking industry.

He emphasized that global demand for the dollar is enormous, and U.S. dollar stablecoins exchanged by foreign investors from U.S. issuers using local currencies are actually injecting net new capital into the U.S. banking system.

Witt's perspective also serves as a strong response to the banking industry's concerns. Previously, institutions such as the American Bankers Association (ABA) issued warnings that stablecoins offering yields could siphon away bank deposits.

Earlier this week, ABA President Rob Nichols stated that while the industry welcomes competition and innovation, regulators should avoid creating an "unfair competitive environment" to prevent crypto enterprises from offering similar banking products without adhering to equivalent regulatory standards.

However, the crypto industry countered that under the GENIUS Act framework, stablecoin issuers must strictly comply with the GENIUS Act's reserve requirements, meaning issuers must fully back stablecoins with cash or equivalent assets to safeguard stablecoin stability.

Additionally, Witt noted earlier this month that what needs to be regulated is not the yield on payment balances themselves, but rather the practice of lending out or re-pledging funds, which the GENIUS Act has explicitly prohibited. This response effectively countered the banking industry's concerns about "stablecoins lacking regulatory safeguards."

Currently, the dispute over stablecoin yields has become the core obstacle to crypto legislation, impeding the progress of key bills including the CLARITY Act. Although the GENIUS Act has established a federal framework for payment stablecoins, the uncompromising mutual competition between the banking and crypto industries has left the legislative process at a standstill.

To break this deadlock, the White House recently urgently convened closed-door meetings between crypto industry and banking executives, attempting to bridge differences through high-level dialogue. While the meetings were described as "productive," the difficult advancement process suggests substantive disagreements remain evident.

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