Stablecoin yield providers could bring new capital into the United States banking system rather than draining deposits, according to Patrick Witt, executive director of the White House Council of Advisors for Digital Assets.
Witt said global demand for US dollar-denominated assets remains strong and stablecoins could increase inflows of capital into the country’s financial system.
“Foreigners exchange local currency for stablecoins from a US-based issuer,”
Witt wrote on social media platform X, adding that “global demand for USD is massive.”
Most stablecoin issuers hold reserves in US dollars or Treasury securities to back the digital tokens they issue, meaning additional demand for stablecoins may translate into higher holdings of dollar-based assets.
The debate comes as policymakers and industry participants discuss provisions in proposed legislation such as the CLARITY Act that could allow stablecoin issuers to offer yields to token holders.
Some banks have warned that widespread adoption of yield-bearing stablecoins could divert deposits from traditional financial institutions.
Witt argued, however, that regulated stablecoins compliant with proposed US frameworks could ultimately attract more foreign capital into the American banking system rather than reduce liquidity.