WASHINGTON – Former President Donald Trump escalated a public dispute with the banking industry this week, accusing lenders of attempting to “undermine” the GENIUS Act, legislation he signed into law last July aimed at regulating stablecoins. The intervention, delivered via a post on his Truth Social account on March 3, underscores the ongoing battle between cryptocurrency advocates and traditional financial institutions over the future of digital assets.
“The Genius Act is being threatened and undermined by the Banks, and that is unacceptable – We are not going to allow it,” Trump wrote. The core of the disagreement centers on whether stablecoins – cryptocurrencies designed to maintain a stable value, typically pegged to the U.S. Dollar – should be permitted to offer yield to customers. The GENIUS Act explicitly prohibits stablecoin issuers from paying interest or yield.
The current impasse stems from the implementation of the GENIUS Act. While the law established a federal regulatory framework for stablecoins, requiring 100% reserve backing with liquid assets and public disclosure of reserve composition, key details are still being hammered out by federal agencies like the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. The OCC issued a proposed rulemaking on February 25 outlining a regulatory framework for stablecoin issuance.
Simultaneously, Congress is considering the U.S. Clarity Act, intended to clarify the supervisory oversight of crypto assets. However, the Clarity Act’s progress has stalled as lawmakers grapple with the yield issue. Banks are pushing to maintain the ban on interest-paying stablecoins enshrined in the GENIUS Act, fearing a potential outflow of deposits if customers can earn returns on stablecoin holdings. Crypto firms argue that denying yield opportunities limits the potential benefits of stablecoins for consumers.
Trump’s post signaled clear support for the crypto industry’s position. “Americans should earn more money on their money. The Banks are hitting record profits, and we are not going to allow them to undermine our powerful Crypto Agenda,” he stated. This stance aligns with his broader embrace of digital assets, including the launch of his own meme coin, $TRUMP, which currently boasts a market capitalization approaching $800 million, according to Coinbase.
The former president’s affinity for crypto reflects a broader ideological alignment. The decentralized, anti-establishment ethos of the cryptocurrency movement resonates with Trump’s populist political style. Bitcoin and other digital currencies emerged as a challenge to traditional financial systems following the 2008 financial crisis, questioning the role of central banks and commercial lenders.
This alignment worries the banking industry. Decentralized finance (DeFi) aims to disintermediate traditional lenders, potentially replacing many of their functions. Allowing yield on stablecoins could trigger a significant shift of funds from bank accounts to digital exchanges, disrupting asset-liability management and potentially creating systemic risk. Some industry observers draw parallels to the fate of Kodak, which failed to adapt to the rise of digital photography.
Trump’s relationship with traditional finance has been complex. While he relied on lenders like Citibank and Merrill Lynch during his career as a property developer, Deutsche Bank eventually severed ties after the January 6, 2021, Capitol riot. He subsequently turned to Axos Financial, an early internet-banking startup.
The former president is currently pursuing a lawsuit against JP Morgan and its CEO, Jamie Dimon, alleging debanking. This history has fueled skepticism within the banking industry regarding Trump’s willingness to defend its interests. Bank lobbyists are actively engaging with lawmakers to express concerns about the potential risks of liberalizing crypto markets, but it appears their message is not reaching the former president.