Patrick Witt, a member of the White House Presidential Advisory Council on Digital Assets, said that cryptocurrencies are a product that is “perceived as a new and somewhat threatening” product to the traditional banking system.
Witt noted that community banks and large banks of global systemic importance (G-SIB) are particularly concerned about the rise of cryptocurrency.
Speaking to Yahoo Finance, Witt stated that an inevitable “convergence” process will occur between crypto and banks, arguing that in the long term, major banks will also enter the digital asset space strongly.
Witt also shared updates on the CLARITY Act, known as a comprehensive regulatory package for the cryptocurrency market. The House of Representatives version of the bill passed last year, and the Senate is currently working on a new version with its own amendments. The sections concerning the CFTC have passed the Senate Agriculture Committee. However, the parts related to the SEC are stalled in the Senate Banking Committee.
Witt stated that the review session planned for January had been postponed, and that they were in close contact to resolve the issues within the Banking Committee. The two different versions of the bill will need to be reconciled and then submitted to a general assembly vote.
Witt stated, “The window is still open, but it’s closing rapidly,” adding that the bill must be passed before the midterm elections begin.
Witt stated that the biggest obstacle to the bill is the issue of offering interest or rewards on stablecoins, adding that some senators have raised concerns about a potential shift of deposits to stablecoin platforms.
In this regard, banks argue that stablecoin yields could weaken the lending capacity of community banks. The cryptocurrency side, on the other hand, supports increased competition and consumer choice.
Witt stated, “We must approach this issue with scalpel precision, not a saw,” adding that the entire bill should not be derailed because of this single point.
Witt acknowledged that crypto is currently seen as a threat by community banks and large banks:
“It’s a new product right now and is perceived to some extent as a threat to both community banks and large banks.”
However, he said that in the long term, banks will adapt to this area and may offer their own stablecoin products. Witt noted that large banks, in particular, are making significant investments in the crypto space, stating that JPMorgan Chase is hiring in the digital asset sector and sees its growth potential.
Witt stated that stablecoins, backed by US Treasury bonds (T-Bills), could provide additional liquidity to the bond market, creating commercial opportunities for large banks. Witt also touched upon the US strategic Bitcoin reserve, saying that following the presidential decree, digital assets held by federal agencies were accounted for and irregular sales were halted. “First, we stopped the bleeding,” Witt said, suggesting that previous sales could have resulted in tens of billions of dollars in potential losses on the government’s balance sheet.
Witt stated that directly purchasing Bitcoin would require a budget decision from Congress.
*This is not investment advice.
