The White House on Monday stepped directly into a growing standoff between the banking sector and the crypto industry, convening executives from both sides in an effort to revive stalled legislation that would establish federal rules for digital asset markets.
The meeting comes after weeks of uncertainty surrounding a long-anticipated Senate Banking Committee vote on a crypto market structure bill. That vote was abruptly shelved last month when Coinbase withdrew its support, triggering renewed debate over how stablecoins should be regulated and who should be allowed to offer yields on them.
Stablecoins Become the Flashpoint
At the heart of the dispute is a provision that would ban most forms of stablecoin rewards. Stablecoins, typically pegged to the US dollar and backed by reserves such as Treasury securities, have become a critical on-ramp into crypto markets.
Platforms like Coinbase have used yield-bearing stablecoins to attract users, offering returns that often exceed those of traditional savings accounts.
Banks see this as a direct threat. Executives from both large and community banks argue that these rewards could accelerate deposit flight from the traditional banking system into crypto platforms.
Their position is straightforward: if crypto companies want to offer bank-like yields, they should be subject to the same regulatory scrutiny, capital requirements, and oversight.
That tension explains why bank trade associations joined crypto executives at the White House meeting, which aimed to find common ground before the bill loses momentum entirely.
Patrick Witt, executive director of the President’s Council of Advisors for Digital Assets, struck an optimistic tone following the discussions, writing on X:
“Over the course of the past few months, we have achieved breakthroughs on several seemingly intractable policy issues. I am confident we will be able to resolve this one too.”
A Legislative Clock That’s Running Out
Despite the White House’s involvement, the path forward in Congress remains narrow. The legislative calendar is already constrained by the approaching November midterm elections. As campaign season intensifies, floor time becomes scarce and bipartisan cooperation harder to achieve.
The Senate Banking Committee’s bill would need support from at least some Democrats to overcome a filibuster. That support looks increasingly uncertain. Many Democratic lawmakers and analysts believe their party could retake the House in November, giving them more leverage next year and reducing incentives to compromise now.
Complicating matters further, the Senate Agriculture Committee recently advanced its own crypto bill, often described as companion legislation. That bill passed without any Democratic votes. If similar partisan lines hold in the full Senate, the effort would almost certainly fail.
Searching for a Compromise Banks Might Accept
Behind closed doors, crypto firms have floated potential concessions to weaken unified bank opposition. One idea circulating among industry lobbyists would require stablecoin issuers to hold a portion of their reserves at community banks.
Milan Dalal, managing partner of Tiger Hill Partners, said such a move could alter the political dynamics:
“This would give community banks an economic incentive and potentially splinter bank opposition.”
Still, it remains unclear whether banks or lawmakers would back such a proposal or how it would be implemented in practice without introducing new risks.
Notably, unlike many regulatory fights, large national banks and community banks have found themselves aligned against the crypto industry. That unity makes compromise more difficult, as there is no obvious faction within banking eager to break ranks.
Trump’s Crypto Ties Add Political Risk
Adding another layer of complexity are President Donald Trump’s own crypto-related business dealings. Over the weekend, The Wall Street Journal reported that the Trump family had quietly sold a 49% stake in crypto firm World Liberty Financial to an Abu Dhabi royal before the inauguration.
The report sparked immediate backlash from Democrats and could harden opposition to any legislation perceived as benefiting the president’s personal interests. Some Democrats have pushed for restrictions preventing Trump and his family from profiting from crypto ventures, but those proposals have been rejected outright by Republicans.
TD Cowen analyst Jaret Seiberg captured the political reality in a research note, writing:
“Industry infighting may be the easier hurdle for crypto market structure legislation to clear. Getting as many as 10 Democrats in the Senate to back the bill is the bigger problem.”
He added that the recent reporting only increases pressure on Democrats to resist moving forward.
What Comes Next
The White House meeting signals that crypto regulation remains a priority for the administration, especially as it seeks to brand the US as a global hub for digital assets. However, optimism from the executive branch may not be enough to overcome a divided Congress, industry rivalries, and intensifying election-year politics.
For now, the bill remains in limbo. Whether compromise emerges or the effort is pushed into the next Congress will likely depend less on technical policy details and more on political timing—and trust—on Capitol Hill.
