Banks, through trade associations and lobbying campaigns, are pressing lawmakers to write provisions that would effectively force stablecoin issuance under banking charters. They argue that only banks have the expertise and reserves to safeguard customers against potential runs. “The risks of unregulated dollar-pegged tokens are too significant to ignore,” said one Wall Street representative.

The crypto lobby strongly disagrees. Groups such as the Blockchain Association and Coin Center warn that rewriting the U.S. stablecoin law to favour banks would create a monopoly that blocks innovative fintech companies and Web3 startups from competing. “This isn’t about safety; it’s about control,” said one industry executive. “Stablecoins don’t need to be confined to traditional banks to be secure.”

The debate comes as Congress inches closer to passing a comprehensive framework for stablecoins, one of the few areas of crypto policy attracting bipartisan interest. Treasury officials have urged lawmakers to act swiftly, citing both consumer protection and national security concerns. Federal Reserve Chair Jerome Powell has also weighed in, saying stablecoins “need a robust role for the Fed if they are to play a significant part in the future of payments.”

Industry players, however, point out that stablecoins such as USDC, issued by Circle, already operate under strict state-level regulations and audits. They argue that forcing them under federal bank oversight would slow innovation without making the system safer.

Beyond Washington, global competition is heating up. The EU’s Markets in Crypto Assets (MiCA) rules already set out a clear framework, and Asian hubs like Singapore are aggressively licensing stablecoin providers. Industry advocates say the U.S. risks falling behind if its own U.S. stablecoin law is designed to benefit banks rather than foster innovation.

For now, negotiations continue behind closed doors, but the stakes are high. With over $150 billion in stablecoins circulating globally, any rewrite of the U.S. stablecoin law will reverberate across crypto markets and payment systems worldwide.