The banking industry continues to pound away at the CLARITY Act, the crypto infrastructure legislation that will set the path for the US to dominate the global digital asset industry. The banking industry’s opposition to the bill is based on FUD. There is a simple solution to their fears; it is called competition. Beating crypto firms by providing a better and more valued service for its customers. Unfortunately, banks prefer a different path: a regulatory moat that will protect their business while denying the population more and improved options when it comes to financial services.
Yesterday, the President and CEO of the American Bankers Association (ABA), Rob Nichols, told CNBC that their concerns are about a potential impact on economic activity and local lending. While voicing support for innovation in the US, Nichols said that issuers of payment stablecoins should not offer yield, as it would drive deposits away from banks.
Even though the concern is hollow, because the bill already prohibits payment stablecoin holders from earning yield, the banking industry has a simple option to mitigate this possibility. Offer a competitive interest rate to deposit holders. Of course, this could mean a lower profit for these banks, which is the real concern for the banking sector.
Banks are already moving into crypto, including becoming stablecoin issuers. Eventually, stablecoins will be ubiquitous as they are not really crypto but update payment and transfer rails that are faster and less costly. This is good for consumers.
As payment stablecoin issuers must hold reserves in cash or highly liquid, low-risk assets like US Treasuries, it makes sense for issuers to offer yield for holders. Unfortunately, this has been prohibited to mollify the Sisyphean voices emanating from the banking sector, to the detriment of consumers.
Nichols spoke for Senators working on the bill, explaining that the intent of the legislation is to ensure there is no economic dampening and that bankers have the perfect solution. Unfortunately, that is to block the competition.
“I do think the crypto and banking sectors can co-exist. I think we can be the banking capital of the world and the crypto capital of the world,” said Nichols without a blink of sarcasm.
“We shouldn’t create a new regulatory structure that takes money out of local lending, ” added Nichols without a iota of proof.
What the Senate should be doing is crafting a law that protects consumers, enables innovation, and supports competition – including on deposits. What the bankers want is a bill that protects their bottom line. It’s that simple.