Wall Street vs Crypto Assets, the lobbying battle in the financial sector has begun in Washington - ChainCatcher

Authors: Jasper Goodman, Michael Stratford, Declan Harty

Compiled by: Shenchao TechFlow

Powerful Wall Street groups are trying to block some Republican proposals aimed at promoting the development of the cryptocurrency industry.

Cryptocurrency executives' significant campaign contributions for the 2024 election have had a profound impact on the banking industry.| Saul Loeb/AFP from Getty Images

The financial sector is embroiled in a lobbying civil war in Washington.

The conflict between cryptocurrency companies and banks, as well as other Wall Street firms, is intensifying, mainly revolving around the new digital asset rules pushed by Republican leadership. This conflict is expected to reach its peak when Congress reconvenes after its August recess.

With President Donald Trump returning to the White House, the crypto industry has achieved a series of lobbying victories, including the first legislative reforms on digital asset regulation. Now, Republicans in Congress are preparing to pass a second, larger-scale bill to promote the development of the crypto market, while Wall Street groups are starting to slow down, warning that certain crypto-friendly reforms could disrupt their business and threaten financial stability.

Some banks are concerned that lending institutions may face the issue of deposit outflows, as customers may turn to less regulated cryptocurrency products.

But this struggle is not limited to Congress. It has also spread to some more obscure corners of financial policy. For example, banking groups are trying to prevent cryptocurrency companies from seeking national bank charters. At the same time, executives in the cryptocurrency industry are lobbying the White House to retain a ban on banks charging customers for data access fees. Meanwhile, some traditional financial firms are warning Wall Street regulators that they are trying to make stock trading look more like cryptocurrency.

"Change is always difficult, especially for those who have already found success and are deeply rooted in the organization, as they will always feel a bit uneasy about radical changes," said Dan Zinn, the General Counsel of the over-the-counter (OTC) Markets operating stock trading systems. "This will definitely alert everyone, whether out of a bit of fear or a bit of excitement."

This conflict highlights the significant changes in lobbying dynamics on financial policy in recent months as Washington begins to embrace the cryptocurrency industry. The right's enthusiasm for the crypto industry has poured hundreds of millions of dollars into influencing Washington in recent years, in some cases surpassing the interests of traditional financial companies, which typically align with much of the Republican financial policy agenda.

This month, the lobbying struggle has entered a heated stage, with banking industry associations calling on lawmakers to retroactively amend a recently signed cryptocurrency law passed by Congress in July, provoking strong opposition from the crypto industry. (House Republicans are also pushing for retroactive amendments to the bill after choosing to accept the Senate version.)

For a long time, bankers have been skeptical of cryptocurrencies. Industry leaders, including JPMorgan CEO Jamie Dimon, have previously scoffed at digital assets, and their Washington agenda has long been at odds with the goals of digital asset companies.

"This has been a turf war that has lasted for many years, and frankly, so far, we have not been able to achieve any regulatory clarity," said Ohio Republican Congressman Warren Davidson(, who has long been an ally of the crypto industry.

However, for several months, the major industry associations representing the banking sector have only offered lukewarm public criticism of the rapidly developing Republican legislation aimed at legitimizing the regulation of digital assets.

After Trump signed a significant bill last month establishing new rules for so-called stablecoins (a type of cryptocurrency pegged to the value of the dollar), they have become more outspoken. Groups such as the American Bankers Association are now urging senators to amend the stablecoin law when they consider a second, larger cryptocurrency market structure bill next month. They aim to prevent all crypto companies from paying yields to customers holding stablecoins and to repeal what they say are provisions allowing state-chartered, uninsured deposit institutions to operate nationwide without proper oversight.

This concern is particularly evident for small banks, as they indicate that they may suffer losses due to customers withdrawing funds and depositing them in crypto products such as stablecoins.

"It feels like there is a move to replace us," said Christopher Williston, president and CEO of the Independent Bankers Association of Texas, whose group is the only major banking group openly opposing the stablecoin bill.

Williston stated that the stablecoin legislation known as the "Genius Act" poses a fundamental threat to the "bank deposits of small lending institutions." He also added that this new legislation is like the "one thousand and first cut" for community banks after experiencing a 15-year regulatory burden brought on by reforms following the 2008 financial crisis.

Cryptocurrency companies that have lobbied for stablecoin legislation for years insist that this matter has been resolved.

The CEO of the leading industry trade organization, Blockchain Association, Sommer Meisinger, stated that the "Genius Act" "is an established law." "There was intense debate in Congress about this, and the introduction of this bill is a compromise by policymakers. So we really should not try to go back and revisit the issue."

Paige Pidano Paridon, the Executive Vice President of the Banking Policy Institute representing large banks, stated that the organization hopes to work with the cryptocurrency industry to establish "clear and fair rules."

She stated, "This is not a competition between banks and cryptocurrencies, but a collaborative effort to establish rules that are applicable to everyone while protecting consumers and the financial system. The American financial system is built on trust, and when ordinary consumers cannot distinguish between what is safe and what is not, the risks increase and the competitiveness of the United States is compromised."

At the U.S. Securities and Exchange Commission (SEC), traditional financial institutions have been urging Wall Street regulators to proceed with caution as the agency considers requests for "tokenization of U.S. stocks" proposed by the cryptocurrency industry. Tokenization refers to placing such assets on the same blockchain as cryptocurrencies like Bitcoin and Ethereum.

Supporters believe that tokenization will help accelerate the speed of stock trading globally and reduce costs. However, institutions such as the Securities Industry and Financial Markets Association and trading giant Citadel Securities, backed by Republican mega-donor Ken Griffin, argue that tokenized stocks should follow the same rules as the thousands of traditional stocks currently traded. Lobbyists expect that the tokenization debate will play a role in the upcoming congressional discussions on a market structure bill, which will delineate cryptocurrency regulatory authority among market regulators. Senate Republicans have vowed to pass the bill this fall.

Indeed, the banking industry's influence in Washington has not diminished at all, as the CEOs of large banks continue to achieve victories in meetings at the Oval Office, while lending institutions benefit from the Republicans' comprehensive deregulation agenda. Some traditional finance industry professionals have also begun to favor the prospects of cryptocurrency.

But at the same time, the banking industry is dealing with the political landscape shaped by the large campaign contributions made by cryptocurrency executives during the last election - and is once again hopeful about the upcoming midterm elections. Cryptocurrency is a top policy priority for the White House and Trump, and Trump's family has invested in several cryptocurrency companies.

These dynamics have made the industry a powerful force. At the Consumer Financial Protection Bureau, executives from the cryptocurrency industry successfully lobbied the Trump administration to abandon efforts to partner with large banks to repeal the "open banking" rule that governs consumer data sharing from the Biden era.

The policy prohibits banks from charging for access to this data, while fintech companies and cryptocurrency firms use this data to support their services and facilitate customers in opening accounts and transferring funds. After intervention by executives from cryptocurrency companies working together with fintech firms, the Consumer Financial Protection Bureau )CFPB( is now reconsidering this rule rather than completely abolishing it.

"Banks are still respected," Davidson said, adding that the Republicans have worked with the banking industry to roll back some regulations that were put in place after 2008. "But frankly, banks have indeed enjoyed benefits in other areas that in many ways protect them from market impacts."