Coinbase CEO Brian Armstrong plunged into Capitol Hill this week with a message that left no room for interpretation.
Sitting across from the Washington, D.C. lawmakers, he and a group of crypto executives revealed they were there to protect what they consider to be the fundamental right to compete.
According to CNBC, the dispute focuses on whether crypto exchanges like Coinbase should be allowed to provide features like interest provided by banks and blows from the banking world.
Brian did not dodge the attack. “I don’t know why the bank wants to lift it up again at this point,” he said in an interview Wednesday. “But they should have to compete on a level playing field in cryptography.”
The line portrayed a sharp contrast between how Coinbase views itself and how banks deal with the situation. Coinbase currently offers users a 4.1% reward to hold USDC, while Kraken offers a 5.5% higher on the same Stablecoin.
Under the new genius law, interest in Stablecoins is off the table, but the rewards are still legal. That legal difference is exactly what banks want to close.
Bank lobby to kill crypto rewards as the fear of capital outflow grows
Banking industry groups are actively putting pressure on Congress to ban these cryptocurrency rewards. They claim that offering a rate like Coinbase’s 4.1% will keep customers away from small banks.
John Court, executive vice president of the Banking Policy Institute; I warned Lawmakers say these compensation programs pose a threat to the country’s broader economic stability.
“If people are withdrawing deposits from their bank accounts and transferring them to stable investments, you’re effectively castrating the ability of the banks to continue lending to the real economy, supporting economic growth and fueling them,” he said.
The warning didn’t come out of nowhere. A report from the Ministry of Finance Borrowing Advisory Committee in April estimated that if the compensation system continues, as many as $6.6 trillion customer deposits could move from traditional banks to stable ones.
Banks say that some kind of change will break the lending model. Brian doesn’t buy it. He called the entire argument “boogieman” and accused him of hiding a large bank behind the fake story.
“The real reason they’re lifting this as a problem is that they’re trying to protect the $180 billion they’ve made in their payments business. This is because big banks are funding behind the scenes. It’s not a small bank.”
Meanwhile, Jamie Dimon, CEO of JPMorgan Chase, met with Senate Republicans. Dimon later told reporters that the issue of Stablecoin Rewards was not mentioned at the meeting, but that regulators still need to be careful. “We’re not against codes,” Jamie said, carefully choosing his words. However, the banking industry he represents is moving fast to get lawmakers to act.
Lawmakers will be split as exchanging letters from crypto groups and banks.
Both sides have submitted letters to the Legislature. On August 12, the American Bankers Association and several state-level associations asked lawmakers to “close this loophole and protect the financial system.” The phrase “close this loophole” is something that banks keep repeating. Their goal is to reclassify the reward system so that they fall into the same limit as interest.
By banning compensation for exchanges such as Coinbase and Kraken, the Crypto Group quickly recovered with the warning that “tilts the arena in favor of legacy institutions that cannot provide competitive returns and take away meaningful choices to consumers, especially large banks.”
Within the Senate, there is no final agreement yet on how to handle it. Market Structure Bills, which include regulations on crypto platforms, have passed several drafts. Nothing has been confirmed. However, some lawmakers believe that the fight for staking and rewards is already underway.
Sen. Cynthia Ramis, a Wyoming Republican who works with South Carolina bank chair Tim Scott, said the issue has already been resolved. “The issue was litigated under the genius law,” Cynthia said, “And I support the compromises achieved by the banks and the digital asset industry. I don’t think this issue should be reopened.”
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