Trump’s cryptocurrency advisor disagrees with Dimon regarding the classification of yield-generating stablecoins as banks.

White House adviser Patrick Witt stated that yield-bearing stablecoins do not need to be subject to banking regulations, as the Genius Act prohibits issuers from lending reserves.

White House crypto adviser counters JPMorgan CEO Dimon’s remarks on stablecoin yields. (Tabrez Syed on Unsplash/Modified by CoinDesk)

What to know:

• A White House crypto adviser dismissed JPMorgan CEO Jamie Dimon’s assertion that stablecoin issuers providing interest should be regulated as banks.
• Patrick Witt contended that the Genius Act prohibits stablecoin issuers from lending their reserves, indicating that their tokens should not be classified as bank deposits.
• Dimon argued that platforms offering yields on customer balances effectively function as banks and should be subject to comprehensive bank-like regulation, while rewards solely related to transactions could be a viable middle ground.

The White House’s crypto adviser challenged JPMorgan CEO Jamie Dimon’s claim that stablecoin issuers who provide interest should adhere to banking regulations.

According to Patrick Witt, the executive director of the President’s Council of Advisors for Digital Assets, stablecoins should not be regarded as deposits since the Genius Act explicitly prohibits issuers from utilizing the reserves that support their tokens for lending purposes.

Dimon stated that banks advocate for stablecoin issuers paying interest on customer balances to be governed by the same regulations as traditional financial institutions, intensifying the discussion around U.S. crypto regulation.

He also mentioned reported conflicts with Coinbase CEO Brian Armstrong, who retracted support for the proposed Clarity Act just a day before the Senate Banking Committee was set to vote on the measure. Dimon emphasized the need for a distinction between rewards associated with transactions and interest on stored balances.

“Rewards are equivalent to interest,” Dimon remarked. “If you are going to hold balances and offer interest, that’s banking. You should be regulated as a bank.”

Dimon acknowledged that banks would accept a compromise allowing crypto platforms to provide rewards linked to transactions. However, firms that operate like deposit-taking institutions should comply with the same standards as banks, which include capital and liquidity requirements, anti-money laundering measures, and federal deposit insurance obligations.

“The deception here is that it is not the payment of yield on a balance itself that necessitates bank-like regulations, but rather the lending or rehypothecation of the funds that constitute the underlying balance,” Witt noted. Rehypothecation takes place when banks utilize clients’ collateral to support their own borrowing.

He underscored the Genius Act, which he stated “clearly prohibits stablecoin issuers from engaging in the latter. Stablecoins ≠ Deposits.”