Wall Street Went To War With Crypto. It’s Losing.

Powerful Wall Street interests, long used to getting their way when Republicans control Washington, are on the brink of a stunning public defeat in the GOP-run Senate.

Senators are poised to move forward on a bipartisan proposal to end a clash between banks and cryptocurrency companies that Wall Street lobbyists hate, clearing the way for a landmark crypto bill to advance this month.

The apparent outcome of the fight shows how the crypto industry, still a relatively new special interest in Washington, is supplanting the banking sector’s entrenched lobbying power. While banks have benefited from friendlier GOP-appointed regulators during the second Trump administration, they have spent much of the last two years fighting against upstart crypto companies that have plowed hundreds of millions of dollars into political and lobbying spending, employing bare-knuckle tactics to notch key policy wins.

“It’s just this unfortunate reality that we’ve found ourselves in throughout this entire Congress,” said Christopher Williston, CEO of the Independent Bankers Association of Texas, a trade group representing small banks in the state. “Just feeling like we’re constantly pushing uphill to defend what should be absolutely sacrosanct in Congress, which is economic development, economic vitality of communities. And yet Congress at every turn just continues to prioritize so-called innovation over the health of the American economy, particularly the rural economy.”

This most recent fight between the two industries centers around whether certain crypto companies should be allowed to offer rewards programs that pay annual percentage yield to customers who hold stablecoins, a type of cryptocurrency designed to maintain a $1 value.

Both sides paint the issue as an existential struggle. Banks say the rewards programs allow crypto companies to mimic interest-bearing bank accounts and could cause customers to take their money out of traditional banks in favor of crypto platforms. Crypto companies have fought back, arguing that the banks are trying to “ban” their competition.

The issue has stalled progress on the crypto industry’s biggest priority on Capitol Hill: a sweeping bill to establish a largely industry-friendly set of regulations that will bring crypto closer to mainstream finance.

Banks had two key allies in the fight: Sens. Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.), whose concerns about bank deposit flight helped delay a Senate Banking Committee markup of the crypto bill in January. But banks are now pushing back on a compromise the lawmakers struck, saying it doesn’t do enough to crack down on crypto rewards programs.

The Tillis-Alsobrooks deal would ban rewards “on a payment stablecoin balance in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.” Privately, bankers say that, while Tillis and Alsobrooks are aligned with their goals, the language still gives too much latitude to crypto companies to offer rewards that mimic interest paid on a traditional bank account.

Bankers hope the fight isn’t over. Local bankers and state industry trade groups are key constituents for many lawmakers, and they could help sway more members if they become more active in lobbying on the issue. But the underlying crypto bill is a top priority for Congressional Republicans and the White House, and standing in the way of it would be a major political risk.

“Given where we started this debate, we moved the needle considerably,” Williston said, though he added that the Tillis-Alsobrooks language “could be stronger.”

The crypto industry’s success has come as it has poured hundreds of millions of dollars into political and lobbying efforts. A crypto super PAC group spent more than $100 million boosting industry-friendly candidates during the 2024 election cycle. That PAC network entered the year with almost $200 million to spend on the 2026 campaign — a staggeringly large sum that has loomed large over policy debates during this Congress.

Banks have countered by upping their own political spending. The Financial Services Forum, which represents the eight largest U.S. banks, launched a dark money nonprofit group late last year that is expected to be armed with around $100 million.

“It’s hard to gauge and hard to discuss metrics when you’re talking about pissed off-ed-ness,” Sen. John Kennedy (R-La.), a key swing vote on the crypto bill, said last week. “I know there are many crypto folks that are pissed. I can tell you the banking guys are setting new records.”

In a joint statement, a group of top bank trade associations said late Monday that the Tillis-Alsobrooks deal does not go far enough.

“Senators Tillis and Alsobrooks are seeking to achieve the correct policy goal — prohibiting the payment of yield and interest on stablecoins; however, the proposed language falls short of that goal,” the statement said. “It is imperative that Congress get this right.”

But in their own joint statement, the lawmakers rejected the banking industry’s complaints.

“Our compromise prohibits stablecoin rewards from resembling interest on bank deposits, our core concern over deposit flight,” Tillis and Alsobrooks said. “Our compromise also allows crypto companies to offer other forms of customer rewards. Most importantly, it helps put us on a bipartisan path to pass the CLARITY Act, providing the regulatory certainty needed to foster innovation. Some in the banking industry may not want either of these things to happen, and we respectfully agree to disagree.”

Crypto firms are broadly willing to accept the Tillis-Alsobrooks compromise, though they say they made significant concessions to the banks.

Despite the banking industry’s general enthusiasm for Trump’s election in 2024 — exemplified by banks’ stock prices riding high on expectations of tax cuts, deregulation and the potential for more consolidation — the past year has proved more sobering. While banks and the financial services industry have racked up a number of wins on the regulatory front, including more lax lending standards and less onerous supervision, the banks keep losing in the crypto fight.

Since late 2025, federal regulators have granted a number of crypto companies trust charters, or narrow banking charters which have helped usher them into the mainstream financial ecosystem. The Federal Reserve has also floated the idea of creating “skinny” master accounts, or limited access to the Fed’s coveted payment system for crypto and digital asset companies. In March, Kraken, a digital asset company, was given access to the system on a trial basis.

And the banking industry has occasionally drawn the president’s ire. Early in the year, Trump called on credit card companies to cap their interest rates — a proposal that the banks and Congress balked at — and went as far as to sue JPMorgan Chase for allegedly debanking him and his family businesses.

Bank advocates hope to address what they view as outstanding gaps in the crypto legislation — but as of now, they have lost their two biggest allies in the fight in Tillis and Alsobrooks. Asked last week if he was fed up with how the banking industry has operated in negotiations, Tillis said the talks are “all transactions” to him.

“I don’t think there are many members who have been as pro-traditional banking as me in the 11-and-a-half years that I’ve been here,” he told reporters. “And sometimes, you’ve got to get people to accept change.”