US regulators to play a key role in the next crypto, Bank Fight

(Bloomberg) – An important battle between crypto firms and traditional lenders on interest and banking charges is determined by regulators appointed by President Donald Trump, who were a vocal supporter of digital currencies. The Genius ACT, which requires stablerecoin issuers to formally register and hold dollar-for-dollar reserves, put a ruling process in effect with US regulators who will determine what qualifies as interest on stableecoins and how far they can go to act like a traditional bank. However, trading groups are already returning against efforts to assign banking charges to crypto firms and find solutions for returns that generate returns. “There is a big battle between the banks and the non-bank stable issuers,” says Caitlin Long, founder of Custodia Bank, a provider of digital asset services. During the first Trump administration, the office of the controller of the currency tried to expand the services a trust bank could provide, and some said it may include making loans and settling payments. This summer, Crypto firms, including Circle Internet Group Inc. and Ripple Labs Inc., applied for the National Trust Bank charges, and the current applications are now a test of the OCC interpretation. Some trading groups opposed the move in July with the argument that the OCC should not have made the determination without public comment and that the move is a ‘loophole’ for trust banks to take advantage of the benefits of traditional banks without making corresponding regulations. “If the applicants can successfully establish themselves as national trust banks that do not provide primarily fiduciary services, but rather provide traditional banking such as payments, other companies, such as the associations expected in 2021, will follow, and hold the US bank and financial system,” the groups wrote in a July letter. An OCC spokesman refused to comment. For crypto firms, these charters can provide a multitude of benefits, including that they no longer have to apply for licenses to do business and do a stronger degree of legitimacy. “This is the momentum we need as a country to push forward,” says Stuart Alderoty, Chief Law Officer of Ripple and president of the National Cryptocurrency Association. “It’s a good thing for the Americans who already own crypto and for those who are crypto curious.” The Trust Bank Charter provides a way for crypto firms to better compete against banks that have been in space for a long time, according to Long. “If the OCC gives these trust charges rather than full banking charges, these banks will have ten to 15% of capital requirements to be a full -fledged bank and are not subject to all the regulations that apply to banks,” Long said. “If the OCC is basically back door that decreases the capital requirements and the regulations on banks, why would the banks then not convert to trust companies instead of being a bank as well?” For banks, the entrance to these firms at traditional finance is an opportunity for cooperation and intense competition. Anchorage Digital head Nathan McCauley said traditional finances increased his outreach to his business and other dramatically in the run-up to the transition of crypto legislation. Some of the largest banks of the country have since announced partnerships with digital asset companies, including JPMorgan Chase & Co. and Coinbase Global Inc. reaching an agreement to connect customers’ bank accounts directly to their cryptocurrency wallets. But the banking industry is also nervous about the competition with the crypto industry, which has a different approach to innovation compared to traditional financial institutions. “It’s an industry that doesn’t think it should wait for rules, unlike the banking industry,” says Karen Shaw Petrou, a managing partner of Federal Financial Analytics, where its financial companies, including lenders, analyze. “StableCoin issuers are just going for it and it’s going to upset the banks more than probably anything.” Crypto firms also look at ways to generate fresh monetary benefits linked to stableecoins after the bank foyer has been successfully designated for a ban on issuers interested in their clients under the Genius Act. The digital asset is mainly used by traders to get in and out of other cryptocurrencies, but is also increasingly used for payments. If the asset is not actively part of a payment, put it in an account, and companies may now not provide user returns to deposit their signs in yield-bearing accounts. “Banks and lawmakers receiving donations from banks are very concerned that a yield -bearing stablecoin that fades the line between the savings vehicle and a payment vehicle makes it much less attractive to have a checking account,” said Zach Shapiro, head of policy at the Bitcoin Policy Institute. Companies now want to expand stablecoin offers, as regulators begin the process of explicitly defining what interest in space looks like and which is permissible for businesses. Recently, Circle has announced a partnership with Binance for a collateral outdoor exchange where customers can park their money if they do not make a payment. The largest US Crypto exchange, Coinbase, is already offering a reward program for certain consumers, which some in the banking industry may be illegal under the provisions of the Genius Act. Coinbase disagrees and says the program has been adjusted to comply with the law. “The statutory language is vague and has room for exception, but that’s when the fun starts,” said Petrou. -With help from Olga Kharif and Katanga Johnson. (Updates with OCC refuse to comment in the seventh paragraph.) More stories like these are available on Bloomberg.com © 2025 Bloomberg MP