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Source: The Economist Magazine, Compiled by: Chopper, Foresight News
First they ignore you, then they laugh at you, then they attack you, and eventually you win.” This sentence is often attributed to Mahatma Gandhi, but the leader of the Indian independence movement never said it.However, this apocryphal adage has become a popular mantra in the cryptocurrency industry.The pioneers of digital finance once suffered from the arrogance, ridicule and contempt of Wall Street elites, but now their power is unprecedentedly powerful.
In the past year, both bankers and digital asset practitioners have had a good harvest.The cryptocurrency industry has been able to gain a foothold largely thanks to the passage of the GENIUS Act in July this year, which provides a clear legal basis for the legal status of stablecoins.Bank stocks have risen 35% since Donald Trump won the election on expectations of looser regulatory conditions.Even if some bankers dislike Trump for other reasons, few of them favor the regulatory policies of a Joe Biden administration.
Despite this,Tensions between old and new are rising, and cryptocurrencies pose a far greater threat than many bankers once imagined.Banks can certainly benefit from deregulation, but their privileged status as the “financial aristocracy” in the Republican camp is now shaky.Sharing this status with an upstart in the cryptocurrency industry is undoubtedly a long-term threat to traditional banks.
Bankers’ most pressing concern right now is stablecoin regulation.The GENIUS Act explicitly prohibits stablecoin issuers from paying interest to buyers. The original intention of this compromise provision is to prevent stablecoins from diverting demand for bank deposits, thereby weakening banks’ lending capabilities.However, a workaround has emerged in the market to circumvent regulation: stablecoin issuers represented by Circle, which issues USDC, will share the proceeds with cryptocurrency exchanges such as Coinbase, and then the exchange will issue “rewards” to users who purchase stablecoins.Traditional banks are strongly demanding that this regulatory loophole be closed.
The issue of interest is not all that separates the two sides.Elsewhere, cryptocurrencies are also trying to break down barriers to entry in traditional finance.In October this year, Christopher Waller, a member of the Federal Reserve Board and a candidate for the chairman of the Federal Reserve, proposed that more institutions may be allowed to access the Federal Reserve’s payment system. This statement worried bankers.However, Waller later walked back the remarks, saying applicants for such Fed accounts still need to hold a banking license.
Finally,On December 12, the cryptocurrency industry successfully pried open the door to the U.S. federal banking system.U.S. banking regulators approved applications for national bank trust licenses from five digital finance companies, including Circle and Ripple.Although this qualification does not give these institutions the authority to accept deposits or conduct lending business, it does allow them to provide asset custody services nationwide without relying on state-level approvals.Previously, banks had lobbied regulators hard against issuing new licenses to these companies.
Taken in isolation, each development — a speech, a banking license, some kind of regulatory workaround by a stablecoin issuer — seems inconsequential.But taken together, these trends pose a serious threat to traditional banks.In fact, the core position of traditional banks in the field of lending and trading brokerage has long been eroded by private credit institutions and new market makers outside the banking system.Naturally, they do not want to lose any more positions.
Cryptocurrency companies believe that preferential policies enjoyed by traditional banks create an unfair playing field and harm market competition.This proposition may have its merits, but paying interest on stablecoins in disguised form in the name of “reward money” is undoubtedly a blatant attempt to circumvent regulation.Lawmakers who voted to ban interest payments on stablecoins just a few months ago have yet to stop such behavior, which reveals the real dilemma facing traditional banks:Their political influence has declined significantly.
Traditional banks are no longer the most vocal financial force in the Republican camp.On the contrary, the cryptocurrency industry has gained a foothold in the “anti-mainstream, anti-elite” political camp of the American right.The largest political action committee in the industry has hundreds of millions of dollars in funds and is ready to invest in the 2026 midterm elections, and money has always been a weapon in political games.Now, when the interests of traditional banks conflict with the cryptocurrency upstarts, the outcome of the game is no longer certain, and may no longer favor the traditional banks.
There was a time when bankers were critical of the Biden administration’s heavy-handed regulation.Ironically, they now have to rely on the support of a group of Democratic senators.These Democratic lawmakers are more worried about the potential risks of disguised interest payments on stablecoins and the money laundering risks associated with them.In opposing cryptocurrency companies to obtain banking licenses, the largest banks in the United States have formed an alliance with labor unions and center-left think tanks.As Gandhi once famously said, “The enemy of my enemy is my friend.”
