Banking Sector Shocked by Stablecoin Interest War... "The Game Changes Before September 30th"

▲ White House, Crypto Regulation, Stablecoin Bill/ChatGPT Generated Image

The U.S. banking sector has launched an all-out last-ditch effort to block stablecoin yield provisions. However, the crypto industry believes that the momentum for the U.S. crypto market structure bill to enter the institutional framework has already surpassed the banking sector's defenses.

Adam Minehardt, Chief Policy Officer at Hyperliquid, stated in an interview with the crypto-specialized YouTube channel Paul Barron Network on May 12 (local time) that the American Bankers Association's (ABA) emergency lobbying effort started too late. Minehardt assessed that the banking sector failed to put forward sufficient practical alternatives early in the bill's discussions, and as a result, lost trust even among friendly forces in Washington. He said, “There's a perception that the banking sector was in the room, but they didn't present enough practical solutions.”

The biggest issue presented in the video was the stablecoin yield provision. The ABA urged bank leaders to contact senators ahead of the Senate Banking Committee's bill review and vote, arguing that loopholes allowing stablecoin interest payments must be closed. However, Minehardt explained that the current text prohibits passive interest received simply by holding, like deposits, but leaves room for transaction-based reward programs. He foresaw that additional lobbying efforts could occur as the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Treasury Department set detailed rules in the future.

Internal divisions within the banking sector were also cited as a factor weakening the bill's obstruction power. Minehardt analyzed that regional banks and large retail banks, which depend on individual deposits, strongly oppose the bill, but custodian banks and investment banks might have different positions due to blockchain pilots or collaborations with crypto companies. He stated that the banking sector does not operate as a single unified group, saying, “Banks with significant retail exposure strongly oppose it, but other banks have great uncertainty between support and opposition.”

The political landscape is also unfolding unfavorably for the banking sector. Minehardt believed that the banking sector finds itself in a direct conflict with the crypto bill, which is one of former U.S. President Donald Trump's key policy objectives. He explained that cryptocurrency holds a high priority within the current White House, and the Trump administration appears to be pushing the bill forward regardless of the banking sector. However, he pointed out that the final hurdles for the bill's passage still include support from some Democratic members, developer protection clauses, ethical provisions, and language related to decentralized finance.

Minehardt presented September 30th as the effective deadline for the U.S. crypto market structure bill, explaining that short-term deadlines are mechanisms to pressure negotiations. He believed that if Democratic votes are not secured, the process after the House plenary session could be challenging, but there is still time for negotiation. At the end of the interview, he assessed that the U.S. government's policy of strategically holding, rather than selling, confiscated Bitcoin (BTC) could also be an important signal. The cryptocurrency market is awaiting the final text of the U.S. regulatory framework amidst the clash between the banking sector's last-minute resistance and the political push for institutionalization.

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