Stablecoin Wars: Inside the White House Battle Between Crypto and Traditional Banks

TLDR:

• Banks presented written prohibition principles limiting crypto’s ability to offer stablecoin rewards 
• Crypto industry demands broad definitions of permissible activities allowing competitive yields 
• Both sides described talks as productive but failed to reach compromise before March 1 deadline 
• Permissible account activities remain the main battleground between traditional and digital finance 

Crypto firms and banking institutions met for a second round of White House yield talks focused on stablecoin rewards. The session revealed clear battle lines between traditional finance and digital asset companies.

Banks arrived with written demands limiting crypto’s ability to offer yield products. Crypto representatives pushed for broader definitions, allowing competitive rewards programs.

No final agreement emerged despite productive negotiations between the opposing sides.

Banks Draw Red Lines on Stablecoin Rewards

Banking institutions presented formal “prohibition principles” at the White House meeting. The document outlined strict boundaries for stablecoin yield offerings.

Traditional banks view crypto rewards as direct threats to their deposit business. The written framework represents their minimum acceptable terms for any compromise.

Eleanor Terrett shared details from sources present during the negotiations. Banks initially refused to discuss any exemptions for transaction-based rewards.

The current proposal shows slight movement with language about “any proposed exemption.” This shift suggests banks recognize some flexibility may be necessary.

Major financial institutions coordinated their position through trade associations. Goldman Sachs, JPMorgan, Bank of America, and Wells Fargo participated in the talks.

Citigroup, PNC Bank, and US Bank also sent representatives. The Bank Policy Institute, American Bankers Association, and Independent Community Bankers of America joined the session.

Banking executives worry about losing customers to higher-yielding crypto products. They seek regulatory protections against what they consider unfair competition.

The prohibition principles aim to limit crypto’s advantages in the marketplace. Traditional finance wants clear rules preventing customer migration to digital platforms.

Crypto Industry Demands a Level Playing Field

Crypto representatives arrived with different objectives for the White House yield talks. Paul Grewal from Coinbase led arguments for broad permissible activity definitions. Miles Jennings from a16z emphasized the need for innovation-friendly frameworks. Stuart Alderoty from Ripple stated that “compromise is in the air.”

The crypto delegation included Josh Rosner from Paxos and Summer Mersinger from the Blockchain Association. Ji Kim of the Crypto Council also participated in negotiations.

These representatives coordinated positions across the industry. They presented a united front against banking restrictions.

Crypto firms argue that stablecoin yields reflect legitimate market activities. They want freedom to offer competitive products without excessive limitations.

The industry seeks definitions of permissible activities that enable diverse business models. Narrow definitions would effectively eliminate their competitive advantages.

Digital asset companies view the negotiations as existential for their business models. Stablecoin yields attract customers and drive platform adoption.

Restrictive regulations could undermine their growth strategies. The crypto side pushed back against banking demands for tight constraints.

Permissible Activities Become Main Battleground

The core dispute centers on defining what account activities allow yield payments. Banks want narrow definitions that limit crypto’s competitive scope.

Crypto firms advocate for broad parameters enabling various rewards programs. This gap separates the two sides despite productive discussions.

Patrick Witt, Executive Director of the President’s Crypto Council, facilitated the session. Senate Banking Committee staff attended to observe the negotiations.

The smaller meeting size enabled more direct confrontation of disagreements. Both sides could address specific concerns without large group dynamics.

Banking representatives argued that certain activities should prohibit yield offerings. They want restrictions protecting traditional deposit relationships.

Crypto firms countered that market-based yields should remain available. The definitional debate reflects deeper philosophical differences about financial services.

Sources described intense but professional exchanges during the White House yield talks. Neither side yielded on core principles during the session.

However, both parties agreed to continue negotiations in coming days. The March 1st White House deadline adds pressure to reach consensus.

Path Forward Remains Uncertain

Both camps acknowledged progress despite failing to reach final agreement. Banks appreciated crypto’s willingness to discuss specific frameworks.

Crypto representatives noted banking flexibility on exemption language. Nevertheless, substantial gaps remain between the positions.

Additional meetings will occur before the end of February. The White House has urged both parties to finalize terms by March 1st.

Banking and crypto sources indicated ongoing communication channels. The reduced meeting format may continue for future sessions.

Traditional banks must balance protecting their business with appearing reasonable. Crypto firms need workable regulations allowing competitive products.

Each side faces pressure from stakeholders to defend their interests. The coming weeks will determine whether compromise proves possible.

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