The Clarity Act, the digital asset market structure bill crypto advocates spent years pushing through Congress, collapsed in the Senate this month, and the White House says it knows exactly who to blame.
White House crypto adviser Patrick Witt said in comments made public this week that opposition to the bill did not start with lawmakers or regulators but with the country's largest banks, which he said manufactured fear among smaller lenders to kill legislation that threatened their deposit base. “It was a wildfire that was started by larger banks that ultimately spread to community banks,” Witt said, arguing that big banks “sold them a line” about stablecoins posing an existential threat to local lending.
Witt's argument centers on a specific fear: that stablecoins, if allowed to compete more freely under a clear regulatory framework, would pull deposits out of traditional bank accounts and into yield-bearing digital dollar products. Community banks, which rely on cheap deposits to fund local lending, lobbied hard against the bill on exactly that basis. Witt pushed back on the sincerity of that opposition, arguing that if community bankers genuinely believed stablecoins threatened their survival, they would be demanding the bill's passage to get ahead of the threat rather than celebrating its defeat.
The episode is the latest sign of how thoroughly traditional banking interests have shaped the outcome of Washington's biggest crypto legislative push in years. Federal regulators have kept up pressure on the industry through enforcement even as the White House pushes a friendlier legislative agenda, leaving crypto firms caught between a supportive executive branch and a Congress where financial-sector lobbying still carries enormous weight.
Witt also used the moment to defend President Trump's own crypto holdings against renewed conflict-of-interest criticism. He said the president had agreed to “not one but two different ethics provisions that were unprecedented in nature,” which included the option to either divest his crypto assets or place them in a blind trust. Witt described the arrangement as “the most unprecedented, far-reaching, stringent, restrictive ethics provision that has ever been agreed to by any president.”
Democratic lawmakers have repeatedly pointed to Trump's crypto ventures, including his family's stake in World Liberty Financial and the president's own memecoin, as reasons to distrust his administration's approach to writing crypto rules. Witt called the criticism “somewhat ironic,” noting that “a lot of senators on banking committees” hold and actively trade stock in the same financial companies they are tasked with regulating.
The Clarity Act was meant to settle a years-long turf war between the Securities and Exchange Commission and the Commodity Futures Trading Commission over which agency polices digital assets, along with setting clearer rules for stablecoin issuers and token exchanges. Its failure leaves that jurisdictional question unresolved heading into next year, and industry groups have already signaled they expect another attempt once the political calendar clears past the midterms.
For now, banks have won the immediate fight, but the underlying business trends have not slowed. Big Tech companies are still hiring for stablecoin-related roles regardless of the legislative outcome, a sign that momentum behind dollar-backed digital payments has not stalled even without a federal law spelling out the rules. Deals blending traditional finance infrastructure with tokenized products have kept closing throughout the year, suggesting the underlying case for stablecoins and tokenization is advancing whether or not Congress catches up.
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Whether that gap between market momentum and legal clarity becomes a lasting problem depends on how the next legislative attempt is built. Witt's comments suggest the White House views bank opposition, not partisan gridlock, as the primary obstacle, which would mean any future version of the bill needs to either win over community banks directly or find a way around their lobbying influence in the Senate.
FAQ
What was the Clarity Act supposed to do?
It aimed to give the SEC and CFTC clearly defined jurisdiction over digital assets and set federal rules for stablecoin issuers and crypto exchanges, replacing the current patchwork of state rules and agency enforcement actions.
Why did banks oppose the bill?
Banks argued that clearer rules for stablecoins would let more money flow out of traditional deposit accounts into yield-bearing digital dollar products, threatening the cheap deposit base many lenders rely on for local lending.
What ethics arrangement did Trump agree to?
According to Patrick Witt, the president agreed to either divest his crypto holdings or place them in a blind trust, which Witt described as the most restrictive ethics provision ever accepted by a sitting president.
Is the Clarity Act expected to return?
Industry groups have signaled they expect Congress to make another attempt at market structure legislation once the political calendar clears past the midterm elections, though no timeline has been set.
