Headline of the Day

Wall Street And Crypto Are At War Over Who Gets To Rob You

—The Lever, describing how banks and crypto bros are are in a lobbying war over legislation regulating cryptocurrencies in Congress.

Both sides are contemptible ganefs, and this is a dispute over the spoils.

The short version is that banks lowball their customers interest rates, and particularly among the larger banks, this has gotten progressively worse.

The new legislation allows the crypto bros to have unregulated deposits that function in much the same way, eliminating a profit center.

Wall Street and Silicon Valley are embroiled in a legislative slugfest over which business interests will get to fleece more of their customers’ money.

A loophole under current law allows stablecoins — crypto tokens pegged to the U.S. dollar — to essentially pay interest on their investors’ holdings, similar to a bank account except without the same regulatory guardrails.

This carveout could lure depositors away from banks’ savings accounts — a move that would threaten a multitrillion-dollar scheme by the banking industry in recent years, in which they’ve paid minuscule interest on customers’ financial deposits while enjoying far higher interest rates from the country’s central bank and pocketing the difference.

Now, banks have launched a last-minute lobbying offensive to protect their margins and avoid competition by preventing crypto from copying their business model. They’re trying to insert new language related to the loophole into a piece of stablecoin legislation, known as the Clarity Act, which the crypto industry had been backing for months.

………

This difference between interest paid to depositors and interest collected from loans — called net interest income — has always been central to banks’ business model. But in a Senate letter sent to executives at Wells Fargo, JPMorgan Chase, Bank of America, and other major financial institutions last year, Sen. Elizabeth Warren (D-Mass.) wrote that banks’ refusal to pass down any of their mounting profits to consumers over the last three years has allowed this net interest income to reach historic levels, creating a massive upward transfer of wealth from account holders to banks.

If savers moved their money to higher-yielding accounts — or to smaller regional and local banks, which have historically passed down more money to depositors than megabanks when interest rates increase — they could recoup tens of billions of dollars, as the Wall Street Journal has reported. But the cartel-like grip that megabanks have on the economy has helped quell competition and kept savers collecting paltry interest rates on their nest eggs.

From this vantage point, stablecoins that pay interest to investors — which the crypto exchanges call “rewards” — could pose a competitive threat to banks’ interest-rate arrangements.

I cannot believe that I am saying this, but I am on the side do the banks, because they are regulated and slightly less likely to just steal folks' money.