For the past year, it felt like we were a long way from the moment in Congress when Sen. Dick Durbin (D-IL) lamented that big banks “own the place.” As the Trump administration took power, a pitched battle emerged between the financial industry and Silicon Valley on a range of issues, and the tech oligarchs, with better connections to MAGA-world and more ability to enrich the Trump organization directly, seemed well positioned to win. The power center seemed to be shifting away from its traditional roots.
But Wall Street didn’t become Wall Street by losing its ability to capture the government. A scuttled markup on a bill with major implications for cryptocurrencies shows that reports of the demise of big banks are greatly exaggerated. In fact, they’re doing better than ever.
The bill, known as the Digital Asset Market Clarity Act (sometimes also referred to as the Responsible Financial Innovation Act), would change the regulatory “market structure” for crypto. Its goal is to move primary jurisdiction over digital assets from the Securities and Exchange Commission to the less aggressive and less well-resourced Commodity Futures Trading Commission. This is the biggest ask from a crypto industry that basically bought Congress in 2024, and bipartisan negotiations have been in motion for months to deliver this to them.
But the window dressing around the bill has captured the attention of lobbyists, particularly the warring factions in the tech and banking worlds. The real sticking point is a holdover from the last bipartisan deregulation of the crypto industry, the so-called GENIUS Act that passed last year. That law put forward a light-touch regulatory regime for stablecoins, a money-like digital token that’s usually pegged to the U.S. dollar and is useful in trading for other crypto assets.
The GENIUS Act restricted stablecoins from paying interest, thereby preventing them from competing with traditional bank deposits. But the crypto industry figured out ways around this: namely, “rewards” paid annually to stablecoin holders. Coinbase’s stablecoin, for example, pays out a 3.5 percent reward on a user’s total value. That looks a lot like a high-yield savings account, without the crypto company having to deal with the bank regulatory requirements for capital and leverage that banks must adhere to.
U.S. banks took in $593 billion in revenue last year, close to a record number and well above 2024.
Coinbase can give out this 3.5 percent reward because it charges other crypto exchanges a fee, almost like a swipe fee that credit cards charge on purchases, for transactions with its stablecoin. That fee is then mostly turned over to the user, building market share for the stablecoin and volume in transactions.
This has absolutely terrified the banking industry, which fears losing deposits, a relatively cheap form of funding for its other activities, to stablecoins. Banks got…
Read More: Wall Street Strikes Back – The American Prospect
