‘i Like Crypto. I Also Like My Banks’: A Lobbying War Squeezes Senators

The cryptocurrency industry’s massive investment to build political power in Washington and win a landmark legislative victory is running into a formidable obstacle: senators’ hometown bankers.

Banks are mounting an aggressive last-ditch campaign to amend a key part of a sweeping crypto bill, leaning on relationships with lawmakers that in many cases stretch back decades. Their lobbying blitz is reviving a fight that crypto companies hoped they had won months ago, and it may soon force Senate Republicans to choose between two powerful constituencies.

“I want to support crypto, I like crypto. I also like my banks,” said Utah GOP Sen. John Curtis. “And they really need to come to a place where it’s [not] either or.”

The fight is a reminder of the banking industry’s enduring influence on Capitol Hill — and of the limits of the political clout crypto companies have amassed through spending hundreds of millions of dollars on elections and lobbying. Banks, particularly hometown lenders, are drawing on their ties with senators — as well as decades of their own political spending — to push back on the crypto sector.

“They know us,” said Sen. Mike Rounds (R-S.D.), who has pledged to vote to advance the crypto bill but has signaled support for making bank-favored amendments on the floor. “Each of us knows those people personally.”

Much of the angst around the bill is being driven by concerns raised by state and local banking organizations that say they could get wiped off the map if protections aren’t added to the bill — claims that crypto firms say are exaggerated. But the push is also backed by many — though not all — Wall Street giants that are flexing their political and lobbying muscles to try to force changes.

That influence is now threatening to complicate one of President Donald Trump’s top legislative priorities — a comprehensive bill known as the Clarity Act that would create a new regulatory framework tailored for digital assets. Two Republicans have said they will oppose the bill without changes sought by banks, while others are voicing concerns as GOP leaders prepare to bring the legislation to the floor next month.

At issue is whether certain crypto firms should be allowed to offer rewards programs that pay yield to customers who hold stablecoins, a form of cryptocurrency designed to maintain a value of $1. Banks warn that crypto rewards programs could lead their customers to pull billions of dollars out of checking and savings accounts, threatening their business model and starving them of the deposits they use to make loans. Crypto supporters say those warnings are overblown — and that Congress already settled the dispute months ago with a bipartisan compromise.

The crypto fight is “the most important thing” on small banks’ Washington agenda, said Alice P. Frazier, the CEO of Potomac Bank in Charles Town, West Virginia, and the chair of the Independent Community Bankers of America.

“We are the local economic drivers of growth,” she said. Crypto companies, she added, “are not going to come back and make loans into the communities the way that we do.”

The bank lobbying push has enraged the crypto industry and its allies in Congress. They say there is little evidence that the deposit flight bankers are warning of would actually take place, and that a deal struck earlier this year by a pair of bank-friendly senators — Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.) — settled the issue. They are also accusing banks, which say the Tillis-Alsobrooks language doesn’t go far enough, of trying to outlaw legitimate competition in the financial services space.

Kara Calvert, vice president of U.S. policy at Coinbase, the largest U.S. crypto exchange, said in a statement that “resistance to disruptive technology—from streaming to ride-sharing—isn't new.”

“But deposit flight is a farce, and banks are promoting fear, not facts,” she said. “Lawmakers have a duty to protect consumers who are best served by competitive innovation, not incumbents.”

The crypto bill maintains strong overall support among Republicans, and it is a top priority for the Trump administration. It remains unclear if the bank-generated concerns will be enough to convince a meaningful number of senators to vote against the bill. Despite pressure from the banks — and the influential Wall Street Journal editorial board — Republicans are vowing to largely stick together to at least advance the bill past a procedural vote when they return from their August recess.

Ultimately, the bill’s fate will likely rest on whether Republicans can strike a bipartisan deal with Democrats, which is needed to pass the measure. Several thorny outstanding issues remain — including an ethics provision that Democrats want in the bill to crack down on Trump’s ability to profit off his family’s crypto businesses. But if lawmakers clinch a bipartisan agreement, the bill could draw enough Democratic support to overcome potential GOP defections.

“There’s still some Republicans that have angst and issues because the banks are spreading false propaganda to a lot of my colleagues, but we’re pushing back on that,” said Sen. Bernie Moreno (R-Ohio), a crypto ally. “I am extraordinarily confident that every Republican will vote for the motion to proceed.”

Moreno and Sen. Cynthia Lummis (R-Wyo.), the Senate’s leading crypto booster, signed on as co-sponsors last week to a bill known as the Credit Card Competition Act that banks have spent years lobbying against — and the Ohio Republican is threatening to use that measure as retaliation against Wall Street groups.

“If this pressure keeps going on, maybe we put both bills together,” he said. “Maybe that’s the favor they deserve.”

Bankers are hoping to capitalize on the August recess, when members will be home in their states. Kenneth Kelly, chair of the largest banking industry trade group, the American Bankers Association, said in a statement that lenders are “encouraged that a growing number of Senators share our deep concern over the current stablecoin rewards language in the Clarity Act and the risk it poses to bank lending and economic activity.”

“Over the recess, ABA members across the country, as well as some of their customers, will be reaching out to Senators back home to share how our modest changes to the legislation can address the rewards issue and help move Clarity forward,” said Kelly, who is also chair and CEO of First Independence Bank in Detroit. “I'm optimistic we will see an improved bill in September.”