07-03-2025 
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The Trump v Musk feud could reduce crypto’s influence in Congress, Circle (NASDAQ: CRCL) wants to be a bank, and Ripple Labs says peace of mind costs $75 million.
- Big, beautiful blowup could threaten crypto’s D.C. power
- NYAG’s Letitia James has some stablecoin concerns
- Circle seeks bank charter, analysts unmoved
- Anchorage disses USDC
- SEC v Ripple over at last
On the legislative front, the U.S. Senate approved President Trump’s ‘big, beautiful’ spending bill on Tuesday thanks to a single tie-breaking vote by Vice President J.D. Vance, despite a handful of last-minute crypto-specific tax proposals—Sen. Cynthia Lummis (R-WY) suggested eliminating ‘double-taxation’ of block reward miners and a de minimis exemption for small BTC purchases—the bill passed without any such goodies.
The crypto carveouts could be resuscitated when the bill returns to the House of Representatives for what promises to be fierce debate over how many trillions it will add to the nation’s long-term debt. One suspects House leaders will have bigger fish to fry than adding crypto-specific tax breaks to already controversial legislation.
Speaking of fierce debate, the simmering feud between Elon Musk and President Trump flared up with a vengeance this week after the Tesla (NASDAQ: TSLA) boss used his massive social media presence to slam the spending bill as a massive betrayal of rank-and-file Americans and a recipe for fiscal disaster.
Musk went as far as to threaten to create a new political party ahead of the 2026 mid-term elections and primary every member of Congress who voted in favor of the bill (so, Republicans). Mind you, Musk says lots of things, but at the time this was written, the odds on him making good on his third-party threat by the end of this year were 40% on Kalshi and 43% on Polymarket.
Assuming it happens, Musk’s new party would almost certainly bleed more support from Republicans than Democrats, in part due to Musk’s reputational toxicity among the latter. That could pose real problems for Trump, whose money-making crypto ventures have been assailed by Dems, with only the GOP majorities in both legislative chambers keeping these attacks under wraps.
Musk spent $250 million boosting Trump and Congressional Republicans in the 2024 election cycle, so his threats should be taken seriously. It also sets up an interesting dynamic between Musk and the wider crypto sector, which spent over $130 million last year boosting pro-crypto candidates of both parties.
There are currently far more crypto-supporting Republicans in Congress than crypto-friendly Dems, so any significant turnover in 2026 could have serious ramifications for the sector.
The crypto sector’s political action committees (PACs) are already opening their wallets to ensure favored candidates win party primaries to become candidates in the general election. The Fairshake-affiliated, GOP-focused Defend American Jobs PAC spent a combined $1.5 million successfully supporting two GOP primary candidates in Florida earlier this year.
Last week, Protect Progress, another Fairshake offshoot focused on electing pro-crypto Dems, spent over $1 million backing James Walkinshaw’s successful bid to become the Dem candidate for Virginia’s 11th district (a special election is scheduled for September to fill the seat left vacant by last month’s death of Rep. Gerry Connolly).
Given the sweeping sector-wide benefits that crypto PACs have achieved since last November’s election, Walkinshaw’s opponents were keen to paint his willingness to accept crypto cash as a negative. But he ended up winning with nearly 60% of the vote, suggesting that money does indeed talk.
In May, a Fairshake-affiliated ‘dark money group called Cedar Innovation Fund openly warned senators to “avoid political games and pass a final stablecoin bill in the coming days.” The GENIUS Act was approved by the Senate the following month.
NYAG warns Congress re stablecoin guardrails
Speaking of GENIUS and its companion bill (STABLE) in the House, New York Attorney General Letitia James sent both chambers a letter on July 1 urging legislators to plug the bills’ regulatory loopholes “to protect investors, the economy, and national security.”
James’s letter makes some good suggestions, including ensuring pass-through Federal Deposit Insurance Corporation (FDIC) insurance for stablecoin issuers. While the two bills in Congress require issuers to hold their reserve assets at insured depository institutions, individual accounts at these institutions are covered only to a maximum of $250,000, meaning a failure of the institution could leave an issuer with billions of uninsured deposits (it’s happened before).
New York’s Department of Financial Services (NYDFS) is considered America’s gold standard for state-level digital asset regulation, which explains why so few crypto operators have obtained a coveted NYDFS BitLicense. It also explains why James’s letter contains a plea to “preserve state prudential supervisory authority.”
However, James is persona non grata with President Trump, and passing GENIUS ASAP is a priority for him. So the GOP-controlled House and Senate aren’t likely to pay much heed to James’s letter, making it more of a marker for future generations to ponder who was sounding the alarm before the crash.
Circle applies for banking charter
The first crypto operator to obtain a NYDFS BitLicense in 2015 was Circle, issuer of the USDC stablecoin. Circle appears to have taken one of James’s suggestions to heart, specifically, her desire for the feds to regulate stablecoin issuers as banks. This would mean regular exams and enhanced net capital requirements, while offering the FDIC protections described above and other perks.
On June 30, Circle announced that it had formally applied to the U.S. Office of the Comptroller of the Currency (OCC) to establish a national trust bank it plans to call First National Digital Currency Bank, N.A.
If approved, Circle would be permitted to custody the over $61.5 billion in fiat reserves backing its USDC stablecoin, rather than farm out that responsibility to a third-party custodian (a role currently held by BNY Mellon [NASDAQ: BK]). Circle could also offer custodial services to other institutional customers.
The ability to self-custody would help Circle reduce its third-party expenses, while custodying others’ assets would help diversify Circle’s revenue. At present, Circle’s revenue is almost entirely dependent on interest earned from the Treasury bills it buys as reserve assets. And with Trump pressuring Federal Reserve chairman Jerome Powell to slash interest rates, Circle’s revenue will feel that knife.
Circle’s banking bid is likely to spark imitators. In April, the Wall Street Journal reported that fellow stablecoin issuer Paxos Trust was considering (re)applying for its own charter. In 2021, the OCC granted Paxos preliminary conditional approval, but this application expired in 2023 when Paxos failed to execute on its business plan.
Other potential applicants include digital asset custodian BitGo, which holds the assets backing the USD1 stablecoin issued by Trump’s decentralized finance (DeFi) project World Liberty Financial (WLF). The Coinbase (NASDAQ: COIN) exchange, Circle’s former USDC partner, is also said to be mulling an application.Despite the charter hoopla, Circle’s shares stumbled out of the gate on Tuesday, slipping $10 to $171.50 in early trading before recovering to close at $192.53 (+6.2%).
That initial stumble may have something to do with a Monday report by JPMorgan (NASDAQ: JPM) analysts that suggested Circle’s shares could be trading as low as $80 by December 2026. The analysts warned that Circle’s current value doesn’t reflect the threat of competition once stablecoin legislation is signed and tradfi firms (including JPMorgan and its ‘permissioned deposit token’) and corporate entities join the party.
Other analysts aren’t nearly as bearish on Circle. Bernstein’s initial coverage suggested a $230 price target, citing Circle’s “strong regulatory edge, liquidity headstart and marquee distribution partnerships.” That said, Bernstein expects Circle to eventually control 30% of the stablecoin market, which is only five points higher than its current share.
Anchorage disses USDC
If approved by the OCC, Circle would follow the lead set by Anchorage Digital, which received its national bank charter in 2021. Coincidentally, on June 24, Anchorage announced a new Stablecoin Safety Matrix that claims to offer transparency into the stability of fiat-backed tokens, and USDC is one of the stablecoins that failed to win Anchorage’s gold star.
Anchorage said it was beginning “a guided phase-out” of USDC, as well as stablecoin minnows AUSD ($130 million market cap) and USD0 ($590 million). Anchorage’s head of global operations, Rachel Anderika, claimed that “not all stablecoins are created equal” and the three tokens “no longer satisfy Anchorage Digital’s internal criteria for long-term resilience.”
Anderika clarified that Anchorage “identified elevated concentration risks associated with their issuer structures—something we believe institutions should carefully evaluate. Anchorage Digital is focused on supporting stablecoins that demonstrate strong transparency, independence, security, and alignment with future regulatory expectations.”
Anchorage’s chief criticisms of USDC are that ~15% of its reserves are held in cash at U.S. banks, leaving them vulnerable to runs like the one that took down Silicon Valley Bank in 2003, nearly costing Circle $3.3 billion. Anchorage also cited USDC’s lack of significant overcollateralization and the alleged lack of “substantive prudential oversight.”
Yet, Anchorage ranks the market-leading USDT (Tether) higher than USDC in both regulatory oversight and reserve management criteria. This is despite the fact that the highly controversial Tether (a) is ‘regulated’ by authorities in El Salvador, which ranks in the bottom-third of countries on Transparency International’s Corruption Perception Index, and (b) includes billions in ‘secured loans’ among its reserve assets, which have never been subjected to a third-party audit.
And Anchorage’s matrix scored the FDUSD stablecoin issued by First Digital Labs even lower than USDC, but the token—which trades almost exclusively on the Binance exchange—was somehow spared Anchorage’s axe.
Anchorage’s abandonment of USDC produced plenty of criticism, including Coinbase’s Viktor Bunin, who called the report “an obvious hit piece.” It didn’t help that Anchorage simultaneously announced “single-click and fully automated stablecoin conversion capabilities for clients. Starting with conversion from USDC to Global Dollar (USDG).”
The Paxos-issued USDG launched last November with the support of the Global Dollar Network, a consortium of digital asset operators including Kraken, Robinhood (NASDAQ: HOOD), Bullish, Galaxy Digital, and, yes, Anchorage.
Also not helping is the fact that other stables (PYUSD, USDP, and RLUSD) scored higher than USDG on Anchorage’s matrix, but Anchorage isn’t (yet) offering simplified conversion to these tokens.
In April, Barron’s reported that Anchorage was the subject of a U.S. Department of Homeland Security (DHS) probe. The focus of that probe wasn’t disclosed, but it’s reportedly being handled by DHS’s El Dorado Task Force (EDTF). The EDTF states that its mission is to “disrupt and dismantle transnational money laundering organizations by conducting aggressive proactive investigations.”
The following month, Anchorage CEO Nathan McAuley described the Barron’s article “what some might call bullshit.” Speaking at the Consensus 2025 event in Toronto, McAuley told the audience that it was “unambiguously clear” that there is “no investigation into us.”
In 2022, the OCC issued a consent order against Anchorage for failing to “adopt and implement a compliance program that adequately covers the required Bank Secrecy Act/anti-money laundering (BSA/AML) program elements.”
It bears mentioning that the OCC’s action was taken before Trump took office and installed new OCC leaders, who have adopted a far more tolerant approach to the issue of crypto-related banking. In May, Anchorage announced a deal to custody the billions in BTC being raised by the president’s Trump Media & Technology Group (TMTG).
SEC v Ripple: put a cork in it
Turning to some non-stablecoin news, the long-running saga pitting the U.S. Securities and Exchange Commission (SEC) against XRP token issuer Ripple is finally over. The civil suit filed by the SEC in December 2020 ended with more of a whimper than a bang, but everyone appears eager to just move on already.
The SEC originally accused Ripple of issuing 14.6 billion XRP tokens to the public without registering them as securities. Yada yada yada, U.S. District Judge Analisa Torres ruled last August that Ripple was partially guilty, partially in the clear, but owed the SEC $125 million regardless.
Ripple promptly appealed the ruling, but the SEC came under new management following Trump’s re-election, and the parties quickly worked out a deal by which the SEC would refund $75 million of that $125 million penalty. This deal required the approval of Judge Torres, so both Ripple and the SEC went back to court to pitch her on the idea.
On June 26, Torres denied their request, citing legal precedent that the court gets to decide what’s fair, not the private litigants. Torres noted that the facts of the case hadn’t changed, only the management at the SEC, and “the parties do not have the authority to agree not to be bound by a court’s final judgment.”
Torres noted that “[i]f the parties genuinely wish to end this litigation today, they are free to withdraw their appeals.” Which is exactly what Ripple CEO Brad Garlinghouse decided to do the very next day. Garlinghouse tweeted that the company was dropping its appeal and that the SEC would do the same, “closing this chapter once and for all.” And to all a good night.
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