WASHINGTON—With the Senate set to vote today to advance crypto market-structure legislation, the threat of more than $6 trillion in deposits being drained from traditional financial institutions, including credit unions, has created a significant lobbying battle between the cryptocurrency and the financial services industries.
It comes at the same time credit unions, and the broader financial services industry is locked in a new fight with the well-heeled retail industry over the newly resurrected Credit Card Competotop Act.
In fact, the fight threatens to derail legislation intended to bring crypto into mainstream finance, the Wall Street Journal reported.
The Clash
The two sides are clashing about what crypto firms call rewards, or annual payments to investors based on a percentage of their total holdings, the Journal noted. Such payments commonly used for stablecoins, and tokens typically pegged to the U.S. dollar and used for trading, overseas payments and money transfers.
“To banks, rewards on stablecoins from companies such as Coinbase that pay out 3.5% resemble high-yielding deposits—but without the regulations they face for holding customers’ cash,” the Journal analysis stated.
The Journal said financial industry groups have flooded lawmakers with letters and phone calls arguing the rewards would decimate Main Street lenders. America’s Credit Unions and the Defense Credit Union Council have been among those groups (see related story).
The Journal noted the national average interest rate for a standard interest-bearing checking account is below 0.1%.
‘Worried About Impact’
“We are hearing every day from community bankers who are worried about the impact stablecoins offering yield will have on their deposit bases and their ability to lend and support their local communities,” Brooke Ybarra, senior vice president for innovation and strategy at the American Bankers Association, told the Journal. The Journal added the fight could delay or upend an expected vote today by the Senate Banking Committee to advance crypto market-structure legislation, which would represent the industry’s first regulatory framework for all digital assets. The House already passed its version of the bill, but Republicans likely need to win support from nearly everyone in their party and some Democrats to get 60 votes and pass it in the Senate, the Journal said.
Crypto Industry Says Bankers Using Misleading Strategy
“Crypto leaders are accusing the American Bankers Association and other groups of making local lenders the face of their campaign when the effort is driven by the nation’s biggest banks, which don’t want crypto firms disrupting their established business,” the Journal reported. “The incumbent financial firms argue that the loss of deposits will hit smaller banks especially hard.”
Stand With Crypto
The report added that members of Stand With Crypto, one of the industry’s biggest grassroots organizations, have also flooded Congress with calls to pass industry rules.
