2025 didn't deliver the blockbuster gains many crypto investors expected, but it did mark a decisive turning point for stablecoins — digital assets backed by dollars that enable quick and cheap payments. America's largest stablecoin issuer, Circle Internet Group Inc. (CRCL:NYSE), went public on the New York Stock Exchange, and Congress passed the GENIUS Act, establishing the first clear federal framework for stablecoins despite opposition from entrenched interests. Even Treasury Secretary Scott Bessent weighed in, predicting stablecoins would grow tenfold in the decade and even backstop the U.S. debt.
That push isn't going unchallenged — banks are now preparing to spend heavily to counter crypto advocacy, with about $100 million earmarked for lobbying ahead of the midterms to blunt the industry's momentum, according to a recent report from Punchbowl News.
The Empire, it seems, is striking back.
The GENIUS Act requires stablecoin issuers to be licensed and fully back their assets with cash while putting in place legal protections for consumers.
And while the passing of the act was hailed as a "landmark moment" by many backers, including sponsor Sen. Kirsten Gillibrand (D-NY), who bullishly declared "this bill will enable U.S. businesses and consumers to take advantage of the next generation of financial innovation," the real battle has just begun.
Indeed, banking giants and their lobby groups are facing off against a motley opposition comprised of crypto companies, fintechs, and other non-bank firms who want to challenge the status quo, to shape just how the many government agencies, from the Federal Reserve to the Treasury department, will interpret and implement the law.
The banks' goal is to discourage consumer confidence in stablecoins and limit the services and products that financial technology (fintech) and other non-bank companies can provide, to protect their moat and continue reaping billions from customers.
Regulatory clarity and industry innovation are essential for maintaining consumer confidence in the staid and slow-moving world of financial services. The banks, however, would prefer to preserve their monopolistic status quo. Which is why industry policy groups like the Bank Policy Institute (BPI) are exploiting the spirit of the GENIUS act to achieve the opposite of its intention: Further entrenchment rather than much-needed evolution.
The battle lines here are many, but among the most crucial is old-fashioned interest - who can pay it, and who can receive it. The GENIUS Act bars the payment of interest by stablecoin issuers — a rule meant to keep these firms from behaving like banks, so this issue seems cut and dry. Still, new digital finance entrants ought to be allowed creative, compliant ways to reward customers: through, say, cash-back programs, loyalty points, or sign-up bonuses.
In the eyes of big banks, these are "interest by another name." Yet traditional institutions themselves routinely use similar incentives, so why should newcomers be barred from doing the same?
The stakes here are huge. The three largest banks in America control nearly 40% of all deposits - trillions of dollars, earning consumers an average of just 0.4% annually, according to the FDIC. Faced with such meager returns, shouldn't technology and some sensible regulation help consumers put their money where it will benefit them most?
Banking lobby groups have warned that this could be disastrous.
First, they allege, stablecoin adoption could destabilize the entire financial system and harm small-town banks in particular. With industry consolidation nearly doubled over the past 25 years, the latter threat is clearly overblown. America's biggest banks have gotten bigger, and they will protect that growth at any cost.
They also argue that stablecoins create new risk because they are not subject to existing industry scrutiny. In fact, the GENIUS Act creates a clear framework that allows new entrants to scale responsibly.
The fact is stablecoins won't upend banking or destabilize the system, but rather force the industry to adapt to new technology or risk declining relevance.
History doesn't repeat, but it rhymes: three decades ago, the Clinton administration led a bipartisan effort to pass the Telecommunications Act of 1996, paving the way for the Dot Com boom and the internet age.
That law deregulated wherever possible, spurring much-needed online innovation and competition. Like with the banks and stablecoins today, legacy telecoms didn't take this lying down, and ramped up lobbying efforts to limit the Act's effectiveness. Sound familiar?
Fortunately, Republicans and Democrats alike were farsighted enough to embrace opportunity - and each other. Sen. John Warner (R-VA) spoke of ending "Depression-era restrictions which have impaired the growth of this dynamic industry." President Clinton quipped that the Act "will bring the future to our doorstep."
Will history now repeat itself with stablecoins?
Democrats and Republicans alike were right to pass the Genius Act. Failing to do so would have created even more industry uncertainty and pushed American users to offshore digital platforms beyond the reach of regulators. But the devil is in the details. Innovation in tandem with consumer protection must drive the Act's implementation - not massive banking incumbents scrambling for profits and market share.
Alex Tapscott is the CEO of CMCC Global Capital Markets and the author of Web3: Charting the Internet's Next Economic and Cultural Frontier
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