How crypto is quietly challenging banks’ power in Washington
For years, the cryptocurrency industry has cast itself as an outsider—dismissed, mocked, and underestimated by traditional finance. Today, that narrative has flipped. Crypto is no longer just a disruptive technology; it is becoming a political and financial force that threatens banks’ long-held influence, particularly within the American right.
Both Wall Street and the digital-asset sector have enjoyed a strong year. Crypto benefited from greater legal clarity after the GENIUS Act passed in July, giving stablecoins a clearer regulatory footing. Meanwhile, bank stocks surged following Donald Trump’s election victory, driven by expectations of lighter regulation. Even bankers who dislike Trump personally have shown little appetite for a return to the stricter oversight of the Biden era.
Despite these parallel gains, friction between banks and crypto firms is intensifying. The deeper issue for lenders is not short-term profits, but a gradual erosion of their privileged status. For decades, banks occupied a dominant position within Republican economic policymaking. That role is now being challenged by crypto companies eager to claim a seat at the same table.
Stablecoins sit at the center of the dispute. While the GENIUS Act bars stablecoin issuers from paying interest—meant to prevent them from draining deposits from banks—issuers have found a workaround. Firms like Circle can share revenue with crypto exchanges, which then offer “rewards” to users. Banks argue this effectively recreates yields under a different name and want regulators to shut the loophole.
Crypto’s ambitions go further than stablecoins. In October, Federal Reserve governor Christopher Waller unsettled bankers by suggesting that more non-bank firms could gain access to the Fed’s payment infrastructure. Although he later clarified that such access would still require bank charters, the message rattled the industry.
That anxiety deepened in December, when regulators approved national trust bank charters for five digital-finance firms, including Circle and Ripple. While these charters do not allow deposit-taking or lending, they do permit nationwide asset custody—removing the need for state-by-state approvals. Traditional banks had lobbied against the move, seeing it as another step toward legitimizing crypto firms inside the banking system.
Individually, these developments might seem minor. Together, they represent a meaningful challenge to banks already under pressure from private credit firms and non-bank trading platforms. Lenders are keenly aware of how much ground they have already lost—and how much more could slip away.
Crypto companies say that banks have unfair regulatory perks that hold back competition. While that argument resonates politically, practices like disguising yields as rewards have tested lawmakers’ patience. The fact that Congress has not acted suggests a deeper shift: banks’ political influence is no longer what it once was.
Crypto has aligned itself with the anti-establishment ethos of the modern American right. Backed by political action committees holding hundreds of millions of dollars ahead of the 2026 midterms, the industry has become a powerful constituency. When banks and crypto firms collide, banks can no longer assume they will win.
Ironically, as banks chafed under Democratic-era regulation, they now find themselves relying on Democratic senators concerned about money laundering and backdoor stablecoin yields. In opposing crypto firms’ push for banking licenses, Wall Street has ended up allied with trade unions and center-left policy groups—an unlikely coalition born of necessity.
The real threat crypto poses to banks is not technological. It is political.
Disclaimer: This article is a rewritten summary based on an original report published on https://www.economist.com/. The original reporting and analysis belong to The Economist.
