Senate Delay Sparks Crypto-Banking Showdown
The U.S. Senate Banking Committee has postponed a vote on a cryptocurrency market structure bill due to intense lobbying between the crypto industry and banks concerning yield-bearing stablecoins. This postponement highlights the tension between crypto innovation and traditional banking, underscoring legislative challenges and potential impacts on financial markets.
A confrontation between the crypto market and banks is taking shape over yield-bearing stablecoins. Coinbase, among others, offers a 3.5% yield on stablecoin holdings, raising concerns among U.S. banks. The American Bankers Association, representing over 10,000 bankers, expressed apprehension through legislative communication channels, prompting the Senate Banking Committee's decision to postpone the bill's voting.
Current regulations, under the Genius Act, disallow yield or interest on payment stablecoins, but crypto entities hint at a loophole. This clash fosters debate about possible effects on traditional financial institutions, notably small banks that might experience deposit drain.
While major banks like JPMorgan Chase and Citigroup resist the rise of these stablecoins, they actively develop proprietary digital currency solutions. In this lobbying skirmish, Tim Scott, Senate Banking Committee Chairman, postponed the vote, emphasizing bipartisan stakeholder input. Scott stated, “This bill reflects months of serious bipartisan negotiations and real input from innovators, investors and law enforcement. The goal is to deliver clear rules of the road that protect consumers, strengthen our national security, and ensure the future of finance is built in the United States.”
Stablecoins Threaten Significant Bank Drain, According to Treasury Estimates
The U.S. Treasury estimated that stablecoins could potentially draw $6.6 trillion away from the U.S. banking system due to yield incentives, contrasting with the $18.7 trillion in total U.S. commercial bank deposits.
Bitcoin (BTC) holds a market cap of $1.93 trillion, priced at $96,459.40, with a dominance of 59.24%. Recent data indicates a 0.79% decline over the last 24 hours, despite gaining 6.65% over the week.
The Coincu research team foresees potential outcomes of this debate impacting regulatory motions and banking-crypto integrations. Historical precedence from the Genius Act influences current negotiations, possibly reshaping both sectors' operating standards.