The industry is replacing Wall Street's privileged position on the American right.
Source: The Economist
Translation: Chopper, Foresight News
"First they ignore you, then they laugh at you, then they fight you, and finally you win." This quote is often attributed to Mahatma Gandhi, but the Indian independence leader never actually said it. However, this fabricated maxim has become a popular adage in the cryptocurrency industry. Pioneers of digital finance have long suffered from the arrogance, ridicule, and disdain of Wall Street elites, but now their influence is stronger than ever.
In the past year, both bankers and digital asset practitioners have enjoyed a bountiful period. The cryptocurrency industry has managed to establish itself largely due to the GENIUS Act passed in July this year, which provides a clear legal basis for the legitimacy of stablecoins. Since Donald Trump won the election, the market has anticipated a more lenient regulatory environment, leading to a 35% rise in bank stocks. Even though some bankers dislike Trump for other reasons, very few of them favor the regulatory policies during Joe Biden's administration.
Nevertheless, the tension between old and new powers is intensifying, and the threat posed by cryptocurrencies is far more severe than many bankers had previously imagined. While banks can benefit from regulatory loosening, their privileged status as "financial aristocrats" within the Republican camp is now precarious. Sharing this status with the new elites of the cryptocurrency industry undoubtedly poses a long-term threat to traditional banks.
The most pressing concern for bankers currently is the regulation of stablecoins. The GENIUS Act explicitly prohibits stablecoin issuers from paying interest to buyers, a compromise intended to prevent stablecoins from siphoning off bank deposit demand, thereby weakening banks' lending capacity. However, a workaround has emerged in the market: stablecoin issuers like Circle, which issues USDC, share profits with cryptocurrency exchanges like Coinbase, which then provide "rewards" to users purchasing stablecoins. Traditional banks are strongly demanding that this regulatory loophole be closed.
The interest issue is not the only point of contention. In other areas, cryptocurrencies are also attempting to break through the entry barriers of traditional finance. In October of this year, Federal Reserve Governor and potential Fed Chair candidate Christopher Waller suggested that more institutions might be allowed to access the Federal Reserve's payment system, a statement that caused concern among bankers. However, Waller later retracted this statement, stating that applicants for such Federal Reserve accounts would still need to hold a banking license.
Finally, on December 12, the cryptocurrency industry successfully pried open the doors of the U.S. federal banking system. U.S. banking regulators approved the national bank trust charter applications of five digital finance companies, including Circle and Ripple. Although this qualification does not grant these institutions the authority to accept deposits or engage in lending, it allows them to provide asset custody services nationwide without relying on state-level approval. Previously, banks had lobbied regulators vigorously against granting new charters to these companies.
Looking at each individual development—a speech, a bank charter, a regulatory workaround for stablecoin issuers—seems insignificant. However, taken together, these trends pose a serious threat to traditional banks. In fact, the core position of traditional banks in lending and trading brokerage has long been eroded by private credit institutions and innovative market makers outside the banking system. They are naturally reluctant to lose more ground.
Cryptocurrency firms argue that the preferential policies enjoyed by traditional banks create an unfair competitive environment that harms market competition. This claim may have some merit, but paying interest on stablecoins under the guise of "rewards" is undoubtedly a blatant circumvention of regulation. Just months ago, lawmakers who voted to ban interest payments on stablecoins have not taken action to stop such practices, revealing the true dilemma faced by traditional banks: their political influence has significantly waned.
Traditional banks are no longer the most influential financial power within the Republican camp. Instead, the cryptocurrency industry has firmly established itself within the American right's "anti-mainstream, anti-elite" political faction. The industry's largest political action committee holds hundreds of millions of dollars, ready to invest in the 2026 midterm elections, and money has always been a powerful weapon in political games. Now, when the interests of traditional banks conflict with those of the new elites in cryptocurrency, the outcome of the game is no longer a foregone conclusion, and may not even favor traditional banks.
Once upon a time, bankers were quite critical of the Biden administration's stringent regulations. Ironically, they now find themselves relying on a group of Democratic senators for support. These Democratic lawmakers are more concerned about the potential risks of stablecoins paying interest and the associated money laundering hazards. In opposing cryptocurrency firms' acquisition of bank charters, some of the largest banks in the U.S. have formed an alliance with labor organizations and center-left think tanks. As the saying goes, "The enemy of my enemy is my friend," a quote that Gandhi also never said.
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