Why Are American Bankers Trying to Block the Senate Cryptocurrency Regulation Project

The journey toward comprehensive cryptocurrency regulation in the United States has entered a crucial phase, but progress is threatened by political intrigue and intense lobbying campaigns. Bankers—traditional financial institutions and banking industry associations—are now key players in determining the fate of laws that should bring clarity to the crypto sector but instead have become battlegrounds between two conflicting financial forces.

The Senate is considering significant changes to the digital asset regulatory framework, but instead of partisan opposition, the biggest disruption comes from strong lobbying support from the traditional banking sector. The Senate Banking Committee has released a new draft that could shape crypto regulation in the US, but the document reflects the outcome of complex negotiations and struggles between opposing interests.

Who Are Bankers and Why Are They Concerned About Stablecoins

To understand this conflict, it’s important first to clarify who is meant by “bankers” in this context. The term refers to large commercial banking institutions and their representative organizations, especially the American Bankers Association (ABA), which actively participates in legislative processes to protect their traditional business models.

Bankers argue that the crypto sector, particularly through stablecoin offerings, seeks to choke off deposit flows, which are a fundamental source of funding for the broader financial system. Customer deposits are the backbone of traditional banking—banks use these funds to make loans and generate profits, while paying interest to depositors. Their fear is that crypto platforms offering attractive yields on stablecoins could divert deposits away from traditional banks.

The American Bankers Association has published arguments stating that a reduction in bank deposits could cause a “multi-trillion dollar disruption to local lending.” The organization fears that small banking communities will be most affected if there is a massive shift of deposits to crypto platforms.

The Debate Over Stablecoin Yields: What Is the Core Issue

The main conflict centers on a simple yet highly profitable question: can crypto platforms offer yields to their stablecoin holders? Last year, Congress passed the GENIUS Act (Guidance and Establishment of New Institutional Understanding for the United States of America on Stablecoin), which states that stablecoin issuers cannot pay interest or yields to holders. However, the law deliberately leaves a loophole: third-party affiliates and intermediary platforms can still offer rewards.

Platforms like Coinbase exploit this legal gap by offering programs that share a portion of profits from reserves where stablecoins like USDC are stored. This creates a mechanism where customers can earn returns without technically being paid directly by the stablecoin issuer.

The banking sector views this situation as “interest paid indirectly by the issuer to the holder,” according to the Bank Policy Institute. They argue this is a semantic scheme aimed at hiding direct competition with bank deposits.

Industry Position Against Banking Campaigns

The crypto industry rejects this characterization and argues that bankers spread misleading information to protect their monopoly position in the payments system. Kara Calvert, Vice President of US Policy at Coinbase, stated it is “quite ridiculous” that big banks are making this a deposit debate when their real concern is about digital payment dominance.

Calvert explained the fundamental difference: crypto reward programs and stablecoins are inherently different from bank deposits. Bank deposits are reinvested for the bank’s own benefit, which is why banks pay interest and have FDIC insurance. In contrast, stablecoin funds stored on crypto platforms remain the property of customers and are not used for operational purposes in the same way.

Summer Mersinger, CEO of the Blockchain Association, stated that “what threatens progress is not a lack of policymaker engagement, but relentless pressure campaigns by big banks to rewrite these laws to protect their own positions.” She acknowledged that lobbying efforts have already forced significant changes to the draft nearing the finish line.

Brian Armstrong, CEO of Coinbase, even openly threatened that his company—reporting $355 million in revenue from stablecoin-related services in Q3—will not support laws that capitulate to banking pressure.

Is the Market Structure Bill’s Compromise Sufficient?

The latest draft of the Digital Asset Market Clarity Act (the name approved by the House of Representatives for a previous version) reflects a proposed compromise: stablecoins cannot offer yields if funds are stored statically, similar to a regular savings account. However, yields can still be generated from active activities and transactions.

This is a partial win for bankers, although the crypto industry claims the GENIUS law loophole remains open. Some observers, like Corey Frayer of the Consumer Federation of America—who previously served as a crypto advisor to the SEC—say that this ban does not truly change the landscape. Platforms can still fund yields through staking and lending, activities explicitly excluded from the ban.

The Long Road to Approval: What’s Next

The legislative process is far from over. The Senate Banking Committee will consider amendments during markup sessions, while the Senate Agriculture Committee also has jurisdiction and has postponed its own hearings until late January to allow further negotiations. Even if both committees approve the draft, alignment between their versions will be necessary before the entire Senate can vote.

Lobbying from Wall Street will remain present at the negotiation table as final details are decided. Mersinger warned that if bankers succeed in blocking the law with “unreasonable demands,” they will be stuck with the language of the GENIUS Act—an outcome they themselves say cannot be enforced. This will be a consequence of their own decisions and will clearly show who is fighting for consumer interests and who is defending monopoly power.

The battle between bankers and the crypto industry will continue to shape the future of digital asset regulation in the US, with far-reaching implications well beyond national borders.