Key Facts
- ✓ The Senate Banking Committee postponed a scheduled vote on the Clarity Act, a bill designed to regulate digital asset markets in the United States.
- ✓ Coinbase CEO Brian Armstrong withdrew his support for the legislation, citing objections to a proposed ban on interest payments for stablecoins.
- ✓ Major banking institutions are actively lobbying to prevent crypto companies from obtaining banking licenses, fearing a loss of traditional deposit market share.
- ✓ In Europe, crypto firms are increasingly opting for payment service provider licenses rather than full banking charters due to significantly lower costs and regulatory complexity.
- ✓ Under the EU's MiCA regulation, a single license allows crypto firms to operate across all 27 member states, a flexibility not easily matched by traditional European banks.
A Legislative Standoff
What began as a series of legal skirmishes has escalated into an open war between the cryptocurrency industry and major banking institutions in the United States. The conflict has now stalled critical legislation intended to define the rules for digital assets in the country.
The Clarity Act, a bipartisan effort to establish a regulatory framework for the market, was scheduled for a committee vote this week. However, the debate was postponed as lawmakers grappled with deep divisions and intense industry pressure.
The Breaking Point
The Senate Banking Committee was poised to advance the Clarity Act, but the vote was pulled from the agenda in the days leading up to the session. The delay stems from a fractured political landscape and a decisive move by a key industry leader.
Internal divisions within the Republican party, with some senators aligning closely with the banking sector, created uncertainty. Simultaneously, certain Democratic lawmakers expressed doubts, seeking stronger provisions to limit cryptocurrency dealings by the U.S. President.
The final blow came from Brian Armstrong, the CEO of Coinbase. His decision to withdraw support for the new regulations effectively halted the bill's progress. Armstrong cited specific objections to the proposed rules.
- A ban on interest payments for stablecoins
- Restrictions on crypto firms applying for banking licenses
- Concerns over the bill's ability to foster innovation
"The level of compliance and the cost of authorization is infinitely lower than that of a bank."
— Cristina Carrascosa, CEO of ATH21
Core Industry Disputes
The central conflict revolves around two major provisions in the draft legislation. First, the bill proposes a prohibition on paying interest for stablecoin holdings. This measure is a direct response to banking industry fears that high-yield crypto products could drain traditional deposit accounts.
Second, financial institutions are lobbying to curb the influx of crypto companies seeking banking licenses. Banks argue that allowing crypto firms to become licensed entities would create unfair competition and systemic risks. The crypto industry, conversely, views these licenses as essential for expanding service offerings.
The core business of a credit institution is to capture deposits, fiat money, and it is not for crypto providers. Therefore, I do not see them requesting it, neither for their business nor for the regulatory requirements it entails.
A Transatlantic Divide
While the legislative battle rages in Washington, the trend of crypto firms seeking banking licenses appears largely confined to the United States. In Europe, the landscape presents a different set of challenges and strategies.
Experts note that obtaining a full banking authorization in Europe is significantly more complex and costly than in the U.S. Consequently, many crypto enterprises are pursuing alternative regulatory pathways.
Instead of full banking charters, European crypto firms are securing payment service provider (PSP) licenses. This approach offers a more efficient route to market.
The level of compliance and the cost of authorization is infinitely lower than that of a bank.
Furthermore, the European regulatory environment encourages partnerships. Crypto firms often collaborate with established payment or electronic money institutions rather than applying for their own credit licenses.
The European Strategy
The European banking framework allows for a more modular approach to financial services. For crypto companies whose primary business is not traditional deposit-taking, a full banking license is often unnecessary.
Under the Markets in Crypto-Assets (MiCA) regulation, once a firm is authorized to operate with cryptocurrencies in one EU member state, it can passport those services across all 27 countries. This creates a powerful incentive to secure the appropriate license efficiently.
Many experts believe the future lies in specialized authorizations rather than universal banking charters. For firms not focused on capturing fiat deposits, a combination of investment service and electronic money licenses is often sufficient.
- Bitpanda and Kraken have already secured payment licenses in Europe
- March deadlines loom for stablecoin service providers
- Partnerships with third-party financial institutions remain a popular model
Looking Ahead
The stalling of the Clarity Act marks a significant setback for the U.S. digital asset industry, which sought regulatory clarity to foster growth. The open conflict with traditional banks has proven that bridging the gap between these two sectors remains a formidable challenge.
As the legislative process resets, the focus will likely shift to finding a compromise that addresses banking concerns while allowing the crypto industry to innovate. The outcome of this standoff will shape the future of financial services in the United States for years to come.
"The core business of a credit institution is to capture deposits, fiat money, and it is not for crypto providers. Therefore, I do not see them requesting it, neither for their business nor for the regulatory requirements it entails."
— Gonzalo Navarro, Director of Financial Regulatory Area at Ontier
