According to PYMNTS.com, the White House is planning to host a banking and crypto summit to restart progress on stalled market structure legislation. The meeting, reported on January 26th and 27th, will focus specifically on provisions dealing with interest and other rewards that crypto companies can offer on customer holdings of stablecoins. This issue caused the Senate Banking Committee to postpone a crucial markup of the bill scheduled for January 15th, after crypto exchange Coinbase withdrew its support on January 14th. CEO Brian Armstrong objected to draft amendments that would eliminate these stablecoin rewards. Analyst Mark Palmer from Benchmark noted the legislative delay is capping valuations for U.S.-exposed crypto firms, while Standard Chartered warned stablecoins pose a grave threat to America’s regional banks by eroding their net interest margins.
Banking vs. Crypto: The Real Fight
Here’s the thing: this isn’t just a technical debate about financial products. It’s a full-blown turf war. Traditional banks see stablecoin rewards as a direct competitor to their own regulated deposit accounts and savings products. And they’re not wrong. Why keep your money in a low-yield bank account when a crypto app offers a better return on what’s essentially a digital dollar? So, the banks have been lobbying hard, and their pushback has directly shaped the legislative text, creating those restrictive provisions that made Coinbase walk away. It’s a classic case of an emerging industry bumping up against an entrenched, heavily regulated one. The friction was inevitable.
What Happens Next?
So, what does the White House summit mean? Basically, it’s an acknowledgment that the private sector lobbying has reached a stalemate and needs a higher-level nudge. Palmer’s analysis that some form of bill is “more likely than not” to pass is probably right—the pressure is too great. But the final version will almost certainly be altered. The question is, whose interests win out? Will it be a bill that heavily restricts crypto innovations to protect bank profits, or one that creates a new, tailored framework for digital assets? The outcome will set the trajectory for the entire U.S. crypto sector. A clear law, even a restrictive one, reduces regulatory risk. And as Palmer noted, that reduction in uncertainty is what could finally unlock broader institutional participation. But if the bill kills the economic utility of stablecoins, what’s the point?
The Bigger Picture Threat to Banks
Let’s talk about that Standard Chartered warning. It’s stark. They’re not worried about wild Bitcoin speculation; they’re worried about the slow, steady erosion of their core business. Net interest margin (NIM) is the lifeblood of traditional banking. If deposits steadily migrate to stablecoin platforms offering better yields, that margin gets squeezed. Hard. This is a long-term, existential threat that goes way beyond any single bill. It forces a bigger question: in a digital age, what is a bank? The legislation being debated at the Senate Banking Committee is just the opening skirmish in that much larger war. The banks are fighting to protect their current model, while crypto firms are arguing for a new one. Someone’s going to lose.
