White House crypto adviser Patrick Witt criticized banking leaders seeking tighter stablecoin reward restrictions as Senate delays pushed the CLARITY Act’s passage odds to a record low.

Patrick Witt challenges banks over CLARITY Act

Witt pushed back after 134 banking executives and industry leaders sent Senate lawmakers a letter seeking changes to Section 10404 of the CLARITY Act.

The section restricts issuers from paying interest or yield on payment stablecoins. Banking groups want lawmakers to extend the restriction to rewards, bonuses and other incentives offered by stablecoin firms or their partners.

Witt framed the request as inconsistent with the industry’s wider opposition to the market structure bill.

“Banks: We must ban the payment of interest on stablecoins to protect community bank lending!.”

He then noted that the CLARITY Act already bans interest payments before criticizing banks that still warn the bill could damage community lending.

His comments targeted the difference between banks’ support for an interest ban and their objections to other parts of the legislation. Bank representatives maintain that the existing language may leave room for stablecoin platforms to offer benefits with the same economic effect as interest.

Why banks want a wider stablecoin reward ban

Signatories included leaders tied to Bank of America, U.S. Bank, Zions Bank, First Hawaiian Bank, Bank of Hawaii, Hancock Whitney Bank, FNBO, Eastern Bank, Lake City Bank and Univest Financial Corporation.

The group said payment stablecoins should function as transaction tools rather than long-term savings products. It warned that rewards linked to a user’s balance or holding period could encourage customers to move money out of insured bank accounts.

Banking leaders claimed that large deposit outflows could reduce the funding available for lending to households, farmers, small businesses and local employers. They estimated that the effect could drain hundreds of billions of dollars from the traditional banking system.

Goldman Sachs CEO David Solomon has taken a different position by supporting the CLARITY Act. His stance separates the investment bank from groups demanding tighter stablecoin provisions before the Senate moves forward.

The debate has direct implications for US stablecoin users. Broader restrictions could limit the rewards that exchanges and other service providers offer, even when stablecoin issuers do not pay interest directly.

CLARITY Act odds fall to a record-low 27%

The banking dispute comes as the CLARITY Act faces a shrinking Senate calendar. Polymarket traders have reduced the probability that the legislation becomes law in 2026 to 27%, its lowest recorded level.

Galaxy Digital has separately lowered its passage estimate to 30% as negotiations extend deeper into the legislative year.

Senate Republicans recently released an updated 616-page draft combining texts from the Senate Banking and Agriculture committees. The framework would place digital commodity spot markets under the Commodity Futures Trading Commission while allowing the Securities and Exchange Commission to oversee investment contract assets.

It also includes protections for certain software developers, blockchain developers and decentralized networks that do not control customer assets. White House-backed ethics provisions would restrict digital asset issuance involving federal officials and their spouses.

Senate delay leaves little time before recess

Senate Majority Leader John Thune postponed CLARITY Act action while lawmakers considered federal nominees and the Lindsey O. Graham Sanctioning Russia Act of 2026. Senators voted on July 28 to advance the sanctions package, leaving fewer working days before the Aug. 8 recess.

Crypto industry participants have urged Thune to begin the cloture process before lawmakers leave Washington, even if a final vote cannot occur. A procedural vote would test whether the bill has enough bipartisan support to overcome Senate hurdles later in 2026.

Failure to begin that process would push the legislation further into an already crowded calendar. Stablecoin reward rules remain one of the issues lawmakers must resolve before the broader US crypto market structure framework can advance.

The Federal Reserve left its benchmark fed funds rate range unchanged at 3.50%-3.75% on Wednesday, extending its pause for a sixth consecutive meeting as policymakers continue to grapple with stubborn inflation.

“Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy,” the policy statement read.

“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong,” the statement added. “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

There were three committee members dissenting, preferring to raise rates by 25 basis points. Nine voted to keep policy in place.

Bitcoin climbed to above $64,400 following the decision, up over 1% over the past 24 hours. The S&P 500 and Nasdaq bounced, trimming earlier declines. Gold also rose, up 1.2% through the day.

The decision came after one of the most uncertain pre-meeting setups in years. Futures markets had assigned roughly a 65% probability to a hold and 35% odds of a quarter-point increase, according to CME FedWatch data.

Bitcoin and other major cryptocurrencies barely moved after the Federal Reserve left interest rates unchanged, suggesting traders had largely prepared for the decision.

Fed keeps interest rates unchanged

Federal Reserve officials maintained the federal funds rate at between 3.5% and 3.75% following Chair Kevin Warsh’s second Federal Open Market Committee meeting.

Policymakers voted 9–3 for the decision, with the presidents of the Cleveland, Dallas and Minneapolis regional Federal Reserve banks preferring a quarter-point increase. Markets had assigned roughly a one-in-three chance to a hike before the announcement.

The Fed described economic activity as “expanding at a solid pace,” citing stable unemployment and job growth that has broadly kept up with changes in the workforce. However, it also acknowledged that inflation remained above its 2% target.

Warsh has avoided giving detailed guidance on future policy and has instead focused on current economic data. He has also created five task forces to examine the Fed’s communications, balance sheet, inflation framework, productivity, and labor-market analysis.

The widely expected hold removed the immediate risk of a surprise hike. However, the three dissents and persistent inflation mean uncertainty has shifted toward the September meeting rather than disappeared.

Bitcoin and top cryptocurrencies barely move

Bitcoin traded at about $64,129 after the announcement, up only 0.3% over 24 hours, according to CoinGecko. Ethereum changed hands near $1,911 after gaining 0.6%.

Other large cryptocurrencies also recorded limited moves. BNB rose 0.4%, XRP gained 1.3%, Solana advanced 0.9%, and TRON added 0.6%. Hyperliquid and Dogecoin were up 1.4% and 1%, respectively.

Total cryptocurrency market capitalization increased just 0.4% to approximately $2.27 trillion. The narrow price changes suggest the rate hold had been largely reflected in crypto valuations before the announcement.

Sentiment nevertheless remained cautious. The daily Crypto Fear & Greed Index stood at 29, within the “Fear” category, on July 29.

Bitcoin’s Coinbase Premium also remained negative. A negative reading means Bitcoin trades at a discount on Coinbase relative to Binance, pointing to weaker U.S. spot demand compared with offshore markets.

Gold rises as crypto-linked stocks diverge

Safe-haven assets outperformed cryptocurrencies during the session. SPDR Gold Shares rose 1.25%, while the iShares Silver Trust gained 2.52% shortly after the Fed announcement.

Their performance showed that investors continued to seek defensive exposure amid inflation concerns and renewed Middle East tensions, even as the expected rate decision produced little direct volatility.

Crypto-linked equities delivered mixed results. Strategy gained approximately 2.1%, while Coinbase fell about 1%. Robinhood declined 1.7%.

Bitcoin miners suffered larger losses. MARA Holdings, Riot Platforms and CleanSpark each dropped roughly 6% on the day. However, these declines had started before the Fed announcement and therefore cannot be attributed solely to the interest-rate decision.

Broader U.S. stock-market proxies moved less sharply. The SPDR S&P 500 ETF, Invesco QQQ and iShares Russell 2000 ETF were each down about 0.4% shortly after the decision. Earlier pressure had come from rising oil prices, Middle East tensions and weakness among semiconductor stocks.

CLARITY Act becomes the next crypto policy test

With the FOMC decision producing no major crypto move, investors may now turn toward the CLARITY Act as the largest U.S. crypto-specific policy catalyst.

Polymarket traders currently give the legislation a 27% probability of becoming law during 2026. The prediction market has generated about $3 million in volume.

Senate negotiations remain divided over political ethics provisions and whether crypto companies should be allowed to offer rewards tied to stablecoin balances. Banking groups argue that such rewards could pull deposits away from traditional lenders.

The bill would establish clearer responsibilities for the Securities and Exchange Commission and Commodity Futures Trading Commission. Failure to advance it before the Senate’s August recess could further narrow its path during the midterm election cycle.

Investors will also watch upcoming inflation and employment figures for signs that the Fed may raise rates in September. Those releases, alongside the CLARITY Act negotiations, could determine whether Bitcoin breaks out of its current range or continues consolidating near $64,000.

But then, those mechanics—along with loads of elaborately fake-looking special effects, which now, rather than being dazzling, are just business as usual—are the hallmarks of all Marvel movies. It seems you can’t build one without them. You also can’t really explain the plot of Brand New Day without giving away the arrival of a surprise character, but here, roughly, is how it goes: Sad Peter Parker goes through the motions of being Spider-Man for four long years, as MJ and Ned study hard at MIT, the college the three of them were supposed to attend together. After graduation, MJ and Ned return to New York; Peter spies on them wistfully, and when he finally does get up the guts to talk to them, his face draws blank stares. He regularly leaves fresh flowers at Aunt May’s grave. The rest of his days are spent foiling workaday crimes, until some weird events shake the city: an unseen force capable of taking control of people’s bodies and brains has begun to wreak mayhem. Meanwhile, Spider-Man’s web-shooting capabilities have gone awry. His know-it-all AI assistant E.V.I.E. informs him that this is due to a massive increase in “arachnid hormones,” which is also causing him to be more aggressive. In other words, he’s angry and stressed out, and he has no idea how to handle his rage.

Credit default swap (CDS) demand is surging throughout the AI industry. Five years of default protection on $10 million of Nvidia debt now costs about $82,000 a year — double since the start of July when it cost roughly $40,000.

CDS spreads are deteriorating rapidly across mega-cap AI stocks including Alphabet, Amazon, Meta, Broadcom, and SpaceX, which all hit record spreads this week.

Alphabet CDS contracts traded up to 67 basis points days after reporting its first negative quarterly free cash flow since its 2004 listing.

Investors refer to the “price” of a CDS by its basis point spread above the notional amount of debt it guarantees.

A basis point is one hundredth of a percentage point, and the higher they “spread” above the notional quantity of debt, the more investors have to pay as a de facto insurance premium.

Companies want their CDS contracts to be cheap. When basis points are low, investors aren’t bidding extra for the right to receive a payout in the event of a credit default. Low basis points on CDS contracts — or even better, no CDS demand at all — indicate confidence that the company will service its debt on-time and in full.

Insurance premium doubles to protect Nvidia credit

Unfortunately, Nvidia’s five-year CDS contracts reached a record 82 basis points on Monday.

Monday’s jump of roughly 14 basis points was the largest single-day move since those Nvidia CDS contracts began trading in November 2025, ICE Data Services reported.

The $330 billion AI company Oracle carries an even worse premium. Its five-year CDSs traded above 215 basis points this week, up from 145 at the end of last year.

S&P Global cut the company’s creditworthiness rating to BBB- earlier this month, the lowest rung of its investment grade band. 

Oracle’s bonds that mature in 2056 and pay 6.7% interest widened eight basis points on Monday to 263 basis points over US Treasuries. Not good.

Even worse, CoreWeave topped 855 basis points on Tuesday. A popular CDS pricing model reads that as roughly a 50% chance of default within five years.

Disturbingly, the instruments themselves have become an unfortunate growth market for Wall Street.

CDS for AI stocks shouldn’t be a growth sector

AI companies and tech stocks accounted for nearly $650 million of second-quarter corporate CDS trading, DTCC data shows. That is up 20% on the first quarter and almost 600% year on year.

The spike in CDS spreads this week followed a Bloomberg report that Nvidia is preparing AI commitments potentially worth more than $750 billion.

Those include a partnership with SK Group valued above $500 billion and talks over a guarantee of as much as $250 billion to help OpenAI lease computing capacity.

Doubt about its ability to service that debt sent CDS rates higher.