Wall Street’s War on Crypto Faces Setback as Senate Poised to Advance Landmark Bill
By Jasper Goodman and Aiden Reiter | POLITICO | May 6, 2026
Washington — Powerful banking interests on Wall Street, historically influential in shaping Republican-led policy in Washington, are facing a surprising setback in their efforts to curb the burgeoning cryptocurrency industry. Senators are moving forward with a bipartisan proposal aimed at resolving a contentious dispute between traditional banks and crypto companies—a move that could clear the way for a landmark crypto bill to be advanced later this month.
This shift marks a significant moment in the ongoing battle between established financial institutions and the relatively new, rapidly growing crypto sector, suggesting the industry’s increasing clout in political and regulatory arenas.
The Battle Lines: Banks vs. Crypto
At the heart of the conflict is whether certain crypto companies should be permitted to offer rewards programs that pay annual percentage yields (APYs) to customers who hold stablecoins—a type of cryptocurrency meant to maintain a value equivalent to one U.S. dollar. Banks argue that these rewards effectively mimic interest-bearing bank accounts, potentially drawing customer deposits away from traditional banks. Crypto advocates counter that this stance is an attempt to "ban" competition and stifle innovation in financial services.
The debate has been a significant roadblock to the crypto sector’s top legislative priority: a comprehensive bill designed to introduce an industry-friendly regulatory framework that brings cryptocurrencies further into mainstream finance.
Political Maneuvering and the Tillis-Alsobrooks Compromise
Banking interests had found crucial support from Senators Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.), whose concerns about potential deposit flight prompted delays in the Senate Banking Committee’s markup of the crypto bill earlier this year. The two senators brokered a compromise that would prohibit 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.”
While this compromise was a step toward meeting banks’ demands, many bankers privately contend the language offers too much leeway, allowing crypto firms to continue offering rewards that closely resemble bank interest. Industry representatives have expressed disappointment with the agreement and are pushing for stronger restrictions.
Christopher Williston, CEO of the Independent Bankers Association of Texas, voiced frustration: “We’re constantly pushing uphill to defend what should be sacrosanct—the economic vitality of communities—yet Congress continually prioritizes so-called innovation over the health of the American economy, particularly in rural areas.”
Crypto’s Growing Political Muscle
The apparent momentum on Capitol Hill reflects the crypto industry’s heavy investment in lobbying and political campaigns. A crypto super PAC spent over $100 million in the 2024 election cycle to support candidates favorable to industry interests. Heading into 2026, that PAC network still holds nearly $200 million earmarked for influencing policy—a staggering war chest that has shaped debate during this Congress.
In response, banks and financial groups have amplified their own efforts. The Financial Services Forum, representing the nation’s eight largest banks, established a dark-money nonprofit last year, reportedly poised to deploy approximately $100 million to defend banking interests.
Despite the escalating battle of political spending, some lawmakers note the deep frustration on both sides. Senator John Kennedy (R-La.), a pivotal swing vote on the crypto legislation, acknowledged, “There are many crypto folks that are pissed. I can tell you the banking guys are setting new records.”
A Divided Verdict on the Compromise
On Monday, several major bank trade associations collectively stated the Tillis-Alsobrooks language “falls short” of its goal to ban yield payments on stablecoins and emphasized the need for Congress to “get this right.” However, Senators Tillis and Alsobrooks pushed back, defending their compromise and emphasizing its bipartisan nature:
“Our compromise prohibits stablecoin rewards from resembling interest on bank deposits, our core concern over deposit flight,” the senators said. “It also allows crypto companies to offer other forms of customer rewards and helps put us on a bipartisan path to pass the CLARITY Act, providing regulatory certainty needed to foster innovation.”
While crypto companies broadly accept the compromise, they note they made significant concessions to reach agreement.
A Changing Landscape for Financial Regulation
Even as banks celebrated regulatory victories under the Trump administration—with looser lending standards and lighter supervision—they have struggled to contain crypto’s rise. Since late 2025, federal regulators have granted several crypto firms limited banking charters, easing their entry into mainstream finance. The Federal Reserve is also exploring “skinny” master accounts to give crypto and digital asset companies limited access to the Fed’s payment system. In March, crypto exchange Kraken was granted trial access to the system.
Tensions have occasionally spilled beyond Capitol Hill. Earlier this year, President Trump called on credit card companies to cap interest rates, a move banks and lawmakers resisted. Trump even initiated legal action against JPMorgan Chase for allegedly cutting off business to him and his family, underscoring the fraught relationship between the president and some bank leaders.
Looking Ahead
With the Tillis-Alsobrooks compromise likely to carry the day, and legislative momentum growing for the CLARITY Act, the banking lobby faces an uphill political fight to further limit crypto rewards programs. While local bankers and trade groups remain vocal constituents, the bill’s importance to Congressional Republicans and the White House makes opposition politically risky.
Senator Tillis summarized the changing dynamic: “Sometimes, you’ve got to get people to accept change.” For Wall Street’s banking giants, that change increasingly means sharing the financial landscape with crypto’s disruptive new players.
Filed under: Wall Street, Federal Reserve, Finance & Tax, Cryptocurrency
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