If the dollar can yield higher returns outside the banking system, will people still keep their money in banks? This is precisely the scenario that traditional finance fears most.
Author: Bibi News
On the evening of March 3, 2026, Trump tweeted on Truth Social: “Unacceptable.”
He then posted several more messages accusing big banks of "monopolizing the market," "creating record profits," and "now trying to obstruct crypto." His son, Eric Trump, also chimed in, saying that banks "have been harming consumers for years."
It appears to be just an ordinary business dispute. But behind those four words lies a power struggle that has been deadlocked for four months—a power battle concerning the future of American finance.
Stablecoin yield focus
The core of this controversy boils down to one word: stablecoin yields.
Stablecoins are digital assets pegged 1:1 to the US dollar, such as USDC and USDT, with a total market capitalization exceeding $300 billion. Issuers primarily invest their reserve funds in short-term US Treasury bonds, yielding an annualized return of approximately 4.2%-5.0%.
For over a decade, American savers have become accustomed to the reality that banks pay almost no interest. With demand deposits yielding nearly zero returns for an extended period, funds remaining in banks essentially provide cheap liquidity to the financial system.
But stablecoins changed that. Starting in 2025, crypto platforms like Coinbase and Kraken began offering users stablecoin yields of around 5%. The same amount of US dollars, held in an on-chain account instead of a bank account, yielded returns hundreds of times higher.
The question then arises: if the dollar can yield higher returns outside the banking system, will people still keep their money in banks? This is precisely the scenario that traditional finance fears most.
From regulatory disagreements to a power struggle
Phase 1: Hidden Competition ( July 2025 - January 2026 )
The debate over stablecoin yields did not suddenly become a focus in Washington.
Its true starting point appeared in the summer of 2025. A piece of legislation originally intended to draw clear boundaries unexpectedly initiated a systemic struggle that continues to this day.
On July 18, 2025, Trump signed the GENIUS Act, which explicitly prohibits stablecoin issuers from directly paying interest to holders. While ostensibly a regulatory measure, it actually draws a crucial red line: a digital dollar can exist, but it cannot become a "yield-bearing dollar."
However, the bill did not prohibit third parties from providing yield incentives. Crypto platforms quickly adapted: stablecoins themselves do not pay interest, but exchanges can distribute yields to users through methods such as "rewards," "yield programs," and "on-chain rewards."
The economic outcomes remained unchanged. The banking industry quickly realized the gravity of the situation: if stablecoin yield models continued, US depositors might migrate funds from the banking system to crypto platforms.
Internal calculations by Bank of America indicate that the potential impact on deposits could reach as high as $6.6 trillion. This figure has rapidly escalated a discussion that initially focused on technological regulation into a power struggle within the financial sector.
From the second half of 2025 to the beginning of 2026, both sides entered a long-term "hidden phase." The banking system pushed for more detailed rules through regulatory channels, attempting to close potential loopholes; meanwhile, the crypto industry quickly formed an alliance, lobbying and coordinating policies to gain the right to interpret the rules.
Phase Two: Key Turning Point (January 2026)
The real turning point came in January 2026.
The Senate Banking Committee, which had planned to proceed with the vote, suddenly postponed its review process. The trigger was Coinbase withdrawing its support for the relevant legislation—due to an amendment that restricts stablecoin reward mechanisms.
This decision changed the negotiation structure: for the first time, the crypto industry made it clear that it was willing to block the progress of the entire crypto market structure bill if profit margins were completely blocked.
Phase Three: White House Intervention ( February 2026 )
In February, the White House began to intervene directly. The White House Crypto Policy Council convened closed-door negotiations with representatives from banks and the crypto industry multiple times, and presented both sides with a new draft of legislative language. According to multiple sources, the White House repeatedly emphasized March 1 as a critical deadline and hinted that if an agreement could not be reached, the president might resort to executive or public political intervention.
Prior to this, Trump had privately met with Coinbase CEO Brian Armstrong. According to Politico, specific details of the meeting were not disclosed, but the president's subsequent public support indicated that he had settled on a position of supporting crypto and resisting lobbying from banks.
Tensions escalated further on February 26 when the Office of the Comptroller of the Currency (OCC) released a 376-page proposed rule introducing a “close financial link” standard, attempting to limit stablecoin platforms from indirectly providing returns to users.
This move was seen by the crypto industry as a proactive measure by regulators to strengthen the stance of banks, triggering a strong backlash.
Phase Four: Power Struggle ( March 1-3 , 2026 )
On March 1, the White House-set deadline for negotiations expired, but no agreement was reached. Both sides only stated that negotiations were continuing, and the situation remained deadlocked. For banks, the delay meant maintaining the status quo; while for the crypto industry, breaking through the regulatory impasse began to depend on higher-level political forces.
Two days later, the situation changed dramatically.
On the evening of March 3, Trump publicly accused large banks on Truth Social Media of "undermining the crypto agenda" and claimed that related legislation was being "hijacked" by the banking system. He further stated, "The United States needs to complete the crypto market structure bill as soon as possible, and Americans should be able to earn more money on their own money." Subsequently, his son Eric Trump escalated the controversy further into issues of consumer rights and market monopolies.
With the president publicly involved, this policy disagreement over legal interpretation quickly transformed into a political confrontation. The focus of the discussion shifted from financial stability risks to competition, fairness, and market power.
The following day, Coinbase CEO Brian Armstrong led his team to the White House for high-level talks, which was seen as a direct reshaping of the negotiating landscape by the executive branch.
Phase 5: Multi-party Game ( March 4th to present )
However, the banking system did not back down. Several financial institutions subsequently submitted documents in principle, insisting on a complete ban on stablecoin yield arrangements.
During a public hearing, JPMorgan CEO Jamie Dimon stated, "If you want to be a bank, then be a bank. But if you're not, don't do what only banks can do." He further emphasized, "Crypto rewards are no different from interest." This argument directly targets the "grey area" that the crypto industry is trying to navigate—circumventing legal restrictions by changing the name of rewards.
Bank of America CEO Brian Moynihan subsequently warned publicly that massive amounts of money could flow from the traditional banking system to the stablecoin market, potentially reaching trillions of dollars.
Meanwhile, the crypto industry has begun to shift its focus to Congress, lobbying Senate offices through industry alliances to push for changes in legislative provisions. Divergence has also emerged among regulatory bodies: the SEC supports accelerating market structure legislation, while the OCC continues to push for restrictive rules.
Senate Banking Committee Chairman Tim Scott stated at the hearing that no substantial outflow of bank deposits has been observed so far, a statement that undermines the banking industry's core argument regarding systemic risk.
Thus, the debate over stablecoin yields has evolved from a bilateral negotiation between banks and the crypto industry into a multi-party game involving the president, regulators, Congress, and industry forces. With increased participation and divergent positions, the uncertainty of the outcome has risen accordingly.
Power transfer rather than technological revolution
Why are banks so panicked?
The banks' panic stemmed not from security, but from survival.
The core business model of banks is called "interest rate spread": they attract deposits at extremely low costs and lend them out at much higher interest rates. For example, a deposit cost of 0.01% + a loan yield of 5% ≈ a profit of 4.99%, which supports the salaries of millions of employees, loan expansion, and the operation of the entire financial system.
But what if a large amount of deposits flow into stablecoins?
More noteworthy is that in March 2026, Kraken Financial, the banking arm of Kraken, the second-largest crypto exchage in the United States, received approval from the Federal Reserve Bank of Kansas City for a limited-purpose master account. For the first time, cryptocurrency institutions can bypass traditional banks to some extent and directly access the Federal Reserve's core payment system.
This move marks a breakthrough in the industry's long-standing exclusion by banks and could prompt other crypto institutions to follow suit. If stablecoins can offer returns close to bank deposits, and crypto institutions gain access to payment channels similar to banks, then banks' two core advantages—funding sources and settlement channels—will face competition.
JPMorgan CEO Jamie Dimon once said, "If you want to be a bank, then be a bank. But if you don't, don't do what only banks can do." On the surface, this is about fair rules, but in reality, it reflects a fear of the shift in financial power.
Banks no longer have access to low-cost funding. They are forced to raise deposit interest rates to compete, increasing costs. Simultaneously, lacking affordable funding, they are forced to raise loan interest rates. Ultimately, financing costs rise across society, and economic growth slows. This threatens not only the banks themselves but the entire financial system.
Why the rush to encrypt?
The crypto industry's desire for stablecoin yields seems simple: let users earn more money and attract more users to the ecosystem. But the actual motivations are more complex.
First, there are direct economic interests at play. The Trump family holds a 38% stake in World Liberty Financial, which issues the USD1 stablecoin. The larger the stablecoin's scale, the more active its trading and ecosystem activities, and the higher the fees and financial returns the issuer can earn. This means that the expansion of the stablecoin market is inherently closely tied to the interests of project teams and investors.
Secondly, there's the institutional status that the crypto industry has long sought. Crypto platforms, exemplified by Coinbase, have been trying for years to escape the gray area of regulation.
If stablecoin-related businesses can be explicitly incorporated into the legitimate financial framework, crypto institutions will no longer be merely objects of regulation, but will become formal participants in the financial system. This not only means an expansion of market space, but also an opportunity to move from the periphery to the core of the financial structure.
The next crucial moment
According to prediction market data, 71-73% of people believe the Clarity Act will pass in 2026 (Polymarket data, as of March 5, 2026). This means crypto has a slight advantage, but the situation is constantly changing, and every piece of news could alter it.
The real key moment will be the Senate Banking Committee vote in mid-to-late March. Once the draft bill is submitted, both banks and crypto will be forced to take a stand. If the vote passes, crypto will gain a huge boost; if it is blocked, this game could be delayed until the next Congress.
If regulation ultimately favors the crypto industry, stablecoins will be allowed to offer returns to users in some form. This means that for the first time, the US dollar could generate interest returns on a large scale outside the banking system. This would be a historic victory for the crypto industry. Stablecoins would no longer be just trading tools, but would become a true alternative to savings accounts.
Another possibility is that the banking system successfully exerts pressure. If stablecoin yields are strictly limited, the US financial system will maintain the status quo in the short term. Banks will retain their deposit base and their core profit structure. However, this also leads to another possibility: some users may turn to DeFi—a less regulated but riskier field—potentially pushing funds into a more unpredictable market.
Therefore, a growing number of voices within Washington are turning to a third path: compromise. This involves allowing platforms to offer transaction rewards or usage incentives, but prohibiting the simple "hold and earn interest" model of stablecoins. This is currently considered the most likely outcome: stablecoins will remain attractive, but will no longer be enough to massively absorb bank deposits; banks will lose some of their monopoly power, but will avoid systemic shocks.
The Future of the US Dollar
On the surface, this controversy is about stablecoin yields. But what's truly being redefined is the form of the US dollar itself.
For the past century, the US dollar has operated solely through the banking system. Savings, payments, credit, interest—all financial activities must occur within bank accounts. Stablecoins are breaking this structure for the first time. The dollar is beginning to move beyond banks and into the internet's native system. It can circulate 24/7, settle globally, and generate returns without bank involvement.
The root of the conflict is not the 5% interest rate itself, but rather the reshaping of the power boundaries of the US financial system once the dollar leaves the banks. The crypto industry is fighting not just for the right to earn returns, but for on-chain dollars to become a legitimate part of the system.
Regardless of how the Clarity Act ultimately passes, one thing has changed—for the first time, the United States needs to decide whether to allow its currency to grow outside the traditional financial system. This is why the Treasury Secretary has made statements, the President has intervened, banks have lobbied, and the crypto industry has collectively spoken out.
What they are fighting for is not a regulatory provision, but control of the next generation of financial infrastructure.
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