Witt Backs CLARITY Act Stablecoin Rules Amid Banking Concerns

White House Crypto Council Director Patrick Witt has expressed support for new stablecoin rules proposed in the latest draft of the CLARITY Act. The updated legislation aims to limit stablecoin rewards, which some fear could attract deposits away from banks and lead to a 'deposit flight'.

The proposed rules include Section 404, which restricts stablecoin rewards that resemble interest paid on bank deposits. Additionally, a 'circuit breaker' mechanism would allow the U.S. Treasury secretary to impose further restrictions if community banks lose significant deposits within 18 months of enactment.

Witt argued that data shows bank deposits have been increasing rather than decreasing, and therefore the deposit flight myth is unfounded. However, some banking groups remain concerned about the new rules, which they believe do not go far enough to restrict stablecoin rewards.