U.S. Banks and Crypto Industry Clash Over Stablecoin Interest, Pro-Crypto Trump Administration Steps In to Mediate

U.S. Banks and Crypto Industry Clash Over Whether Stablecoins Should Pay Interest
Banks Warn of Weakened Competitiveness, Call for Equal Regulation of Stablecoins
Trump Administration Stays Pro-Crypto, Unlikely to Side With Banks

The White House is set to hold talks with the crypto industry and the banking sector on the direction of digital asset legislation. With the two sides sharply divided over whether stablecoins should be allowed to pay interest, the government appears to be stepping in to broker a compromise in order to keep the legislative push on track. Market participants, however, say it is unlikely that banks’ demands will be fully reflected, given that the Donald Trump administration has maintained a pro-crypto stance and has largely tilted policy momentum toward the digital asset industry.

White House Leads Mediation Talks on the CLARITY Bill

On the 28th (local time), Reuters, citing multiple sources familiar with the matter, reported that the White House will convene banking and crypto executives on Feb. 2 to discuss a compromise between the two sides. The focus is how the so-called CLARITY bill addresses stablecoin interest and rewards. Two weeks earlier, the U.S. Senate Banking Committee released a revised draft that partly reflected industry demands, allowing crypto firms to continue offering rewards (interest) to investors holding stablecoins, contingent on certain qualifying activities.

But Coinbase CEO Brian Armstrong, who has been closely involved in the legislative process, quickly withdrew his support after the revised draft was released. He pointed to several problems, including provisions that would effectively ban tokenized equities, restrict decentralized finance (DeFi) while allowing unlimited access to financial information, weaken the authority of the Commodity Futures Trading Commission (CFTC) and subordinate it to the Securities and Exchange Commission (SEC), and potentially block stablecoin rewards (i.e., interest payments). Coinbase argues that the clause limiting exchanges and other third-party platforms from offering interest linked to customers’ stablecoin balances should be removed entirely. Banks, by contrast, say that if stablecoin-related returns are provided through third-party platforms such as Coinbase, it creates deposit-like economic effects and could erode the deposit base.

The dispute traces back to the GENIUS Act, a stablecoin framework passed last year. The law prohibited stablecoin issuers from paying interest directly, but did not clearly address whether third parties such as exchanges could provide rewards on balances. That legal ambiguity has fueled intense debate as lawmakers move to finalize the broader CLARITY bill.

Banks’ Position Looks Increasingly Precarious as Stablecoins Surge

The clash between the crypto industry and the banking sector has been intensifying in the wake of the GENIUS Act, as stablecoins have rapidly expanded their market footprint. According to market research firm Artemis Analytics, stablecoin transaction volume reached $33 trillion last year—an all-time high and a 72% jump from the previous year. Circle’s USDC ranked first with $18.3 trillion in volume, followed by Tether’s USDT at $13.3 trillion.

If stablecoins become widely adopted as a mainstream instrument that does not require traditional intermediaries, the role of legacy banks could shrink—raising existential questions for the sector. As crypto-denominated assets are converted into U.S. Treasuries and generate steady returns, stablecoin issuers could effectively operate as quasi-financial institutions built on Treasury yield. That would signal stablecoins’ shift from being merely a payment tool to becoming a vehicle for asset management.

Against this backdrop, major U.S. banking groups—including the Bank Policy Institute (BPI), the American Bankers Association (ABA), and the Consumer Bankers Association (CBA)—argue that stablecoins should be subject to the same supervisory and regulatory framework as banks if they are to provide interest or interest-like returns to holders. In August last year, the groups said via outlets including Cointelegraph and American Banker that stablecoin issuers sit outside key banking oversight regimes such as deposit insurance, capital requirements, and liquidity rules, and that allowing them to pay interest would put them in direct competition with bank deposits—an explicit regulatory imbalance. They conveyed to Congress and the U.S. Treasury that if stablecoins are allowed to offer returns, bank-style regulation must apply across the board; otherwise, such payouts should be explicitly prohibited.

Crypto Industry Holds the Upper Hand in Public Sentiment

Market conditions, however, appear to be tilting in favor of the crypto industry rather than the banking sector. The Trump administration has been pursuing pro-crypto policies under its stated goal of turning the United States into the world’s crypto capital. Earlier, Patrick Witt, executive director of the President’s Digital Asset Advisory Council, warned banks in a statement that attempts to derail legislation over the issue of stablecoin interest would only entrench the status quo and deliver no meaningful results. The remark has been interpreted as a signal that the administration does not intend to be swayed by bank lobbying that it sees as stifling innovation.

Leaders in the crypto industry have also stepped up their criticism of banks. Joseph Lubin, co-founder of Ethereum, sent a letter to Congress alongside more than 125 crypto companies, stressing that restricting consumers’ freedom to use their assets would undermine U.S. competitiveness. Galaxy CEO Mike Novogratz likewise called efforts to roll back the GENIUS Act misguided, arguing that banks should stop hiding behind regulation and instead strengthen their competitiveness through fair competition.

Coinbase CEO Brian Armstrong has said that banks’ fears are overstated and that the stablecoin debate should be approached from the perspective of national competitiveness. “Stablecoin rewards do not affect the lending market, but they are a key factor in determining the global competitiveness of U.S. stablecoins,” he said, warning banks against “missing the forest for the trees.”