White House Steps In as Banks and Crypto Clash Over Stablecoin Policy
Washington is entering a decisive phase in the long-running clash between traditional finance and the crypto industry, with the White House preparing a second round of closed-door negotiations on stablecoin regulation just as fintech groups push the Federal Reserve to open core payment rails to non-banks.
The two debates, one centered on the stalled CLARITY Act, the other on proposed Federal Reserve “payment accounts,” have converged into a broader fight over who will control the future architecture of U.S. money.
White House Presses for Breakthrough on the CLARITY Act
Senior banking and crypto executives will return to the White House on February 10 for another private summit aimed at unblocking the CLARITY Act, a comprehensive digital-asset regulation bill that cleared the House in 2025 but remains stuck in the Senate.
The biggest obstacle: whether stablecoin issuers should be allowed to pay interest.
Banks argue that yield-bearing stablecoins could trigger a dangerous form of “shadow banking,” siphoning deposits out of the financial system and destabilizing balance sheets. JPMorgan and other major institutions are expected to emphasize that such products pose “existential” risks if allowed to compete directly with insured deposits.
Crypto firms counter that banning interest would kill a core area of innovation just as global competition over decentralized finance accelerates. They insist that stablecoin yield is simply a modern financial tool, not an existential threat.
Little progress was made during the first round of talks on February 2, prompting the White House to escalate its involvement. Officials have told both sides they want a workable compromise before the end of the month, warning that continued gridlock could cause the CLARITY Act to lose momentum in the Senate.
A Regulatory Battle Over the Shape of U.S. Finance
The dispute has evolved into a proxy war over the future structure of the U.S. financial system.
Yield-bearing stablecoins, typically pegged to the U.S. dollar, offer returns far higher than bank savings accounts. Traditional institutions fear this could create a parallel system without federal backstops such as deposit insurance or resolution frameworks.
Crypto firms see these objections as an attempt to preserve bank dominance.
The White House’s Cryptocurrency Committee is now seeking middle ground, perhaps a framework for regulated yield-bearing products that avoids destabilizing banks while preserving competition.
Meanwhile, Fintechs Push Fed to Open Payment Rails
At the same time, the Federal Reserve is weighing a proposal that could further reshape the financial landscape: a limited-purpose payment account that would give certain non-bank firms direct access to Fed settlement systems, such as Fedwire and possibly FedNow.
Fintech trade groups, led by the American Fintech Council, argue that allowing supervised non-banks to clear payments directly would improve competition, reduce reliance on sponsor banks, and modernize outdated settlement pathways.
“A well-designed payment account can expand competition and responsible innovation in payments without introducing new risk,” said Phil Goldfeder, the group’s CEO.
Under the proposal, these accounts would not pay interest, would cap balances, and would not grant access to the discount window, avoiding the full privileges of a Master Account.
Banks Warn of Crypto Exposure and Run Risks
Banking associations fiercely oppose the plan, calling it a fundamental shift in U.S. monetary policy. They argue that giving payment firms direct access to the Fed, even under restrictions, could:
- encourage deposit-like activity outside the insured banking system
- weaken banks’ funding bases
- enable stablecoin issuers or crypto-linked firms to settle transactions in central-bank money without full supervision
Although the proposal never mentions crypto, banks say stablecoin firms are among the most likely beneficiaries of such access. This echoes earlier disputes involving Custodia Bank, the Wyoming-based crypto bank that has fought unsuccessfully for a Master Account.
The debate is shaping up as a critical test of whether the Fed is open to redrawing the boundaries of U.S. financial infrastructure.
Fed Governor Christopher Waller said this week that the central bank hopes to pilot a “skinny” form of account by year-end—one that allows limited settlement access while preventing risk migration into the Federal Reserve system.
Two Policy Fronts, One Defining Question
With the CLARITY Act stalled and pressure mounting on the Fed’s payments proposal, Washington is wrestling with a fundamental question:
How much of the future of money should be controlled by regulated banks, and how much space should crypto firms, fintechs, and new payment models be allowed to claim?
The White House wants answers by the end of February. Whether it gets them remains far from certain.
