The cryptocurrency and banking industries are facing off over competing visions of digital asset regulation at the agency level, seeking to define the future of the financial landscape at key regulators. <\/p>\n
Leading trade associations on both sides have submitted numerous letters and comments to the Treasury Department and the Office of the Comptroller of the Currency (OCC) in recent days in an effort to influence implementation of a new stablecoin law and the fate of crypto\u2019s push for bank charters. <\/p>\n
The crypto industry secured a major victory earlier this year with the passage of the GENIUS Act<\/a>, which aims to create a regulatory framework for dollar-backed digital tokens known as stablecoins.\u00a0<\/p>\n However, the measure leaves many details up to the regulators, creating an opening for banks to seek more favorable interpretations of provisions that have concerned the industry. <\/p>\n The American Bankers Association (ABA), Bank Policy Institute (BPI), Independent Community Bankers of America (ICBA) and other banking groups have submitted various letters to the Treasury Department in response to its advance notice of proposed rulemaking on the GENIUS Act. <\/p>\n A key point of contention has been the law\u2019s prohibition on stablecoin interest or yield. Since President Trump signed the stablecoin bill in July, the banking industry has voiced concerns that it leaves open a \u201cloophole\u201d for crypto firms to provide rewards through other means. <\/p>\n After initially appealing to lawmakers<\/a>, who are currently negotiating additional crypto legislation, the banks have turned their attention to the regulators.\u00a0\u00a0<\/p>\n In a letter<\/a> Tuesday, the ABA and its state counterparts urged the Treasury Department to \u201cbroadly interpret\u201d the law\u2019s interest prohibition, arguing it would reflect Congress\u2019 intent that stablecoins \u201cbe used for transactions and not as investment vehicles.\u201d\u00a0<\/p>\n They also recommended the agency bar both direct and indirect payments from stablecoin issuers to prevent companies from getting around the provision through affiliates or partners. <\/p>\n The ICBA similarly argued in a separate letter<\/a> Tuesday that allowing for such payments \u201cis contrary to and would negate the clear meaning and purpose of the law.\u201d\u00a0<\/p>\n Beyond their arguments about what lawmakers intended, the banks underscored longstanding concerns about how stablecoins could impact deposits. <\/p>\n They have repeatedly warned that the dollar-backed digital tokens could prompt customers to pull their deposits from banks, resulting in more limited lending capacity, particularly for community banks. <\/p>\n \u201cThe substantial amount of deposits that would migrate away from community banks to yieldbearing stablecoins would cause a structural shock to credit markets that would hit community banks and their consumer, small business, and agricultural customers particularly hard,\u201d ICBA wrote. <\/p>\n They pointed to a recent paper<\/a>, supported by the Consumer Bankers Association, that found interest-bearing stablecoins would result in a 25 percent decrease in deposits and a reduction of about $1.5 trillion in lending capacity.\u00a0\u00a0<\/p>\n The banking industry\u2019s push to close the interest \u201cloophole,\u201d among other issues it has targeted in the implementation of the GENIUS Act, has riled the crypto industry. <\/p>\n The Blockchain Association has argue<\/a>d that the stablecoin law is \u201cunder attack\u201d by banks, who they have accused are attempting to \u201cunravel\u201d the measure in order to protect their own business interests.\u00a0<\/p>\n In its own response<\/a> to Treasury on Tuesday, the crypto trade group pushed for a narrower reading of the law. It also urged the agency to clarify that the interest restrictions do not apply to third-party exchanges or platforms.\u00a0<\/p>\n \u201cAny prohibition broader than the plain text of the statutory language would needlessly restrict innovative use cases and consumer opportunities related to Payment Stablecoins, and potentially even surpass the Treasury’s statutory authority,\u201d it wrote. <\/p>\n The industry has also pushed back on the banks\u2019 concerns about deposit outflows, citing a separate study, commissioned by Coinbase, that found no material risk to community banks from stablecoin adoption. <\/p>\n As the two sides battle over implementation of the GENIUS Act at Treasury, a second front in the crypto-banking clash is playing out at the OCC. <\/p>\n Several crypto firms have applied for national trust bank charters from the agency as a means of streamlining compliance under the stablecoin law, among other motivating factors. <\/p>\n This has sparked pushback from the banking industry, which is urging the OCC to reject the charter applications. BPI released a series of letters<\/a> Friday that it sent to the agency opposing bids from Ripple, Circle, Paxos, National Digital Trust Company and Wise.\u00a0<\/p>\n \u201cBPI cautions that endorsing this pathway and allowing firms to choose a lighter regulatory touch while offering bank-like products could blur the statutory boundary of what it means to be a \u2018bank,\u2019 heighten systemic risk and undermine the credibility of the national banking charter itself,\u201d it noted in a press release. <\/p>\n ICBA separately wrote<\/a> to OCC on Monday opposing Coinbase\u2019s application for a national trust charter, arguing the crypto exchange fails to meet the statutory requirements for a charter.\u00a0<\/p>\n Coinbase chief legal officer Paul Grewal shot back at the community bankers\u2019 group Tuesday, accusing bank lobbyists of \u201ctrying to dig regulatory moats to protect their own.\u201d <\/p>\n \u201cFrom undoing a law to go after rewards to blocking charters, protectionism isn\u2019t consumer protection,\u201d he wrote<\/a> on X.\u00a0<\/p>\n The Blockchain Association similarly accused BPI of attempting to box out competition in the financial space. <\/p>\n \u201cRather than defending the status quo, it\u2019s time to drain the regulatory moat that protects traditional finance from new entrants,\u201d Blockchain Association CEO Summer Mersinger said in a statement<\/a>.\u00a0<\/p>\n \u201cBlockchain Association applauds these applicants that are pursuing oversight through the OCC trust charter process,\u201d she continued. \u201cUltimately, it\u2019s not BPI\u2019s role to determine who merits a national trust charter \u2013 that responsibility lies with the OCC. We appreciate the agency\u2019s careful, merit-based evaluation of each application, free from political or industry pressure.\u201d <\/p>\n It remains unclear where the agencies will come down on these issues. However, as part of his new embrace of digital assets, Trump has placed crypto-friendly officials in key roles. <\/p>\n The president\u2019s newfound passion for crypto, which emerged on the campaign trail last year, has repeatedly caused headaches for both his administration and the industry, as he and his family continually expand their business footprint in the crypto space. <\/p>\n Trump\u2019s recent pardon<\/a> of Binance founder Changpeng Zhao has come under scrutiny<\/a> in recent weeks over the crypto exchange\u2019s involvement with the Trump family\u2019s crypto venture World Liberty Financial.\u00a0<\/p>\n