US ‘crypto’ market: Stablecoins, nihilists, see-no-evil regulators

Getting your Trinity Audio player ready...

Stablecoins remain a digital asset market structure legislative tripwire, with the U.S. Treasury Secretary casting thinly veiled threats/insults at the nihilists running America’s largest ‘crypto’ exchange.

• Market structure talks still stuck in neutral
• Treasury Secretary v Coinbase CEO
• Crypto sector lays out ‘stablecoin reward principles’
• Congress Dems accuse SEC chairman of falling down on the job
• CFTC welcomes crypto CEO advisors, turfs enforcement lawyers
• Fairshake opens its midterm campaign financing wallet

Congress is on a weeklong break, but behind-the-scenes negotiations continue on how to proceed with digital asset market structure legislation. But only one of the major sticking points preventing advancement of the Senate Banking Committee’s CLARITY Act appears to be under active discussion.

On February 13, White House crypto advisor Patrick Witt told Yahoo Finance that this week could see another meeting of representatives from both the digital asset and banking sectors at 1600 Pennsylvania Ave. to work on a resolution to the stablecoin ‘yield v reward’ impasse.

Cheat sheet: The GENIUS Act that Congress passed last year prohibits stablecoin issuers from offering yield (interest) to token holders. But non-issuing digital asset firms like Coinbase (NASDAQ: COIN) are offering rewards (interest) to stablecoin holders on their platforms. Banks want Congress to extend the GENIUS prohibition to third-party platforms; otherwise, bank customers will (allegedly) mass withdraw their deposits in search of greater yield/rewards/interest.

The White House has hosted two stakeholder meetings on this issue to date, with no real progress. But Witt said last Friday that “we might host another one again” this week based on his view that the most recent meeting “established some new common ground, some areas of agreement and we’ll build on that.”

Witt encouraged both sides to “find a middle ground” so CLARITY can advance out of the Senate Banking Committee. Only then can CLARITY be reconciled with the companion bill advanced last month by the Senate Agriculture Committee and sent to the Senate floor for a vote.

Witt warned that “there’s a window here” in which this legislative process can advance, but this window “is rapidly closing.” The White House previously set an end-of-February deadline to resolve this impasse, underscoring the urgency for stakeholders to “cut the deals that they can, to stay at the table.”

With November’s midterm elections set to “take all the oxygen out of the room,” Witt said, “the most precious real estate in Washington, DC is Senate floor time.” The White House is said to be “in regular touch” with Senate Majority Leader John Thune (R-SD) about ensuring sufficient time is reserved for a CLARITY vote (assuming the obstacles can be removed).

Witt said Thune understands that passing market structure legislation “is a priority” for both President Trump and Witt’s ‘boss,’ White House AI & Crypto Czar David Sacks, and so “we’re going to get it done.”

“These men are nihilists, there’s nothing to be afraid of.”

Pressed to identify the villain in this fight, Witt demurred, although he did suggest banks should stop viewing stablecoin yield as “somewhat threatening” and realize that “they can also offer stablecoin products to their customers just the same as crypto. This is not an unfair advantage in either way.”

A slightly different view was voiced by Treasury Secretary Scott Bessent, who earlier this month told a Banking Committee hearing that there was “a nihilist group in the industry who would prefer no regulation over this very good regulation.”

Bessent echoed this view on February 13 when he told CNBC that while there is “a group of Democrats who want to work with Republicans” to pass CLARITY, “there are a group of crypto firms who have been blocking it … and that doesn’t seem to have been good for the overall crypto community.”

Bessent was referring to the specific language tweeted by Coinbase CEO Brian Armstrong last month, in which he said his company would “rather have no bill than a bad bill.” Coinbase’s last-minute withdrawal of its support for CLARITY resulted in the Banking Committee cancelling a planned markup session the night before it was scheduled to occur.

The same day that Bessent lobbed his thinly veiled attack against Coinbase, Armstrong tweeted that eliminating his company’s ability to offer stablecoin rewards to customers “would make us more profitable since we payout large amounts in rewards to our customers holding USDC.”

USDC, the stablecoin issued by Circle (NASDAQ: CRCL), accounted for nearly 19% of Coinbase’s Q4 revenue. Coinbase also holds a significant equity stake in Circle, and earns as much or more from USDC than Circle. So Armstrong’s claims have to be taken with a self-serving grain of salt, given that far fewer Coinbase customers would want to hold USDC if they weren’t being paid rewards.

Back to the top ↑

Crypto sector lays down stablecoin reward red lines

The banking sector representatives who attended the last White House meeting reportedly presented their opponents with a set of ‘principles’ on the yield/rewards issue, effectively a set of red lines they consider inviolable.

On February 13, the Digital Chamber crypto trade association issued its own Stablecoin Reward Principles, which seek to preserve the stablecoin ‘activities’ exemptions contained in CLARITY’s most recent draft.

Specifically, as they relate to stablecoin use on decentralized finance (DeFi) platforms, the Chamber warns that eliminating these activity exemptions “would severely undermine dollar dominance in the digital asset ecosystem, effectively ceding this area to foreign jurisdictions and risks foreign currencies replacing U.S. dollar denominated stablecoins in these essential portions” of said ecosystem.

Regarding the bankers’ claim that mass customer deposit flight will negatively impact the ability of smaller community banks to issue new loans, the Chamber offers the somewhat incomprehensible pledge that “no person shall circumvent a direct or indirect yield prohibition and that firms must make accurate disclosures clarifying that any yield earned is not comparable to interest.”

And the Chamber exposes its skepticism regarding the deposit flight issue by championing the CLARITY draft’s pledge to conduct a study two years after enactment, “examining the benefits of increased payment stablecoin activity and its impact on deposits.”

Meanwhile, the National Credit Union Administration (NCUA) is seeking comments regarding the GENIUS Act’s plans to license, regulate, and supervise stablecoin issuers that are subsidiaries of federally insured credit unions.

Comments must be submitted by April 13, as GENIUS requires the NCUA to issue implementing regulations for these would-be stablecoin-issuing subsidiaries by July 18. Further info on the NCUA proposal can be found here.

Back to the top ↑

Atkins gets an earful

Securities and Exchange Commission (SEC) chair Paul Atkins wasn’t asked about the stablecoin impasse during a pair of appearances last week before the House of Representatives Financial Services Committee and the Senate Banking Committee.

But Dems on both panels were eager to assail Atkins on another major obstacle to Congress passing market structure legislation: the ‘ethics’ question, aka whether elected officials—including President Trump—should be allowed to profit off crypto ventures when they have the power to legislate away crypto oversight.

Atkins was grilled at length over the fact that the SEC has paused or dropped nearly all the investigations into crypto firms that began under Atkins’ predecessor, Gary Gensler. These include the market manipulation suit the SEC brought against Justin Sun, founder of the Tron network, in 2023.

The Tron suit was ‘paused’ one year ago despite it being built on what Financial Services Democrats called “detailed allegations of systematic securities violations.” The Dems sent Atkins a letter last month asking whether the SEC paused this suit due to Sun’s “significant financial contributions” to the Trump family’s crypto ventures. 

During the House hearing, Dems also piled into Atkins over the SEC’s May 2025 dismissal (with prejudice) of its civil suit against the Binance exchange. Last October, Trump pardoned Binance founder Changpeng ‘CZ’ Zhao, who served four months in prison after pleading guilty in 2023 to charges of violating the Bank Secrecy Act.

That pardon followed a series of moves in which Binance appeared to be assisting Trump’s crypto ventures, including the exchange’s involvement in a $2 billion deal with a UAE investment fund that directly benefited the Trump-linked DeFi project World Liberty Financial (WLF). More recently, it was revealed that WLF had sold a 49% stake to a UAE government official just days before Trump took his oath of office in January 2025. 

Rep. Stephen Lynch (D-MA) referenced Sun, Binance, and Trump in terms of the SEC’s ‘stand down’ approach to crypto, saying “it boggles my mind that this is going on and there’s no consequences to what the president’s doing.” When Atkins claimed he couldn’t speak to any one case, Lynch interjected by saying, “You’ve got to be kidding me … that’s a target-rich environment. Start anywhere you want.”

Lynch warned that the SEC’s self-inflicted “reputational damage” is hurting the broader digital asset market. Lynch pointed to the recent plunges in the value of BTC, ETH, and other prominent tokens, arguing that “people are losing trust” that the market is legit.

Sean Casten (D-IL) discussed the Trump family’s seeming immunity from oversight, asking Atkins if he could point to a single instance in which “you have put the interests of investors first and cost the Trump family money as a result.” Atkins said he couldn’t speak to “what the Trump family does or not,” but insisted that the SEC puts “investors first every single day” by targeting fraud.

Atkins replied in the negative when Sylvia Garcia (D-TX) asked whether Trump or anyone associated with him had ever leaned on him to look the other way. Nydia Velázquez (D-NY) began asking whether Atkins’ former ownership of $6 million in tokens before he was sworn in as SEC chair had anything to do with the SEC’s crypto enforcement pullback, but her time expired before she could finish.

Cynicism regarding Atkins’ crypto approach extends beyond Congressional Democrats. Ahead of Atkins’ Capitol Hill appearances, the non-profit investor protection watchdog Better Markets predicted that the SEC would soon rechristen itself as the “Syndicate for the Empowerment of Crypto.”

Back to the top ↑

CFTC welcomes crypto CEOs, turfs enforcement attorneys

During his Capitol Hill appearances, Atkins was asked how the SEC was collaborating with its counterparts at the Commodity Futures Trading Commission (CFTC). Atkins said representatives from the two agencies are meeting weekly as they plan to assume full regulatory oversight of the digital assets sector if/when CLARITY passes.

With Atkins having declared that few if any tokens are securities as defined under current regulations, the CFTC will handle the bulk of digital asset oversight. To help the CFTC shoulder this burden, the regulator has announced the members of its new Innovation Advisory Committee (IAC).

The above execs will almost certainly have helpful suggestions for expunging the few regulatory guardrails the CFTC and SEC might have overlooked in their ongoing campaign to remove all obstacles to ‘innovation.’

CFTC chair Michael Selig is currently the only sitting member of the CFTC’s normal five-person commission, and President Trump has offered no indications that he plans to nominate anyone to keep Selig company. This has led to yet another factor delaying passage of the market structure: the ‘quorum’ issue, with Dems demanding that the White House observe precedent requiring two members of the minority party to be represented in the leadership of federal agencies.

The CFTC’s staffing issues don’t stop there. On February 9, Barron’s reported that the CFTC’s Chicago office—the agency’s spiritual home—had only a single lawyer staffing its enforcement division, down from its usual complement of 20. The day after this report, Barron’s reporter Nick Devor said the final Chicago attorney had thrown in the towel, leaving literally no one watching the shop.

As one turfed attorney put it, the elimination of this enforcement team “sends a very bad signal to market participants about whether the government is watching what they’re doing and whether or not they have to abide by the law.”

As another attorney put it, “If I was a different person, I would launch a crypto scam right now, because there’s no cops on the beat.”

Devor quoted several Dem senators expressing alarm at the news, with Dick Durbin (D-IL) saying, “This seems far from a coincidence as the president and his family peddle their own cryptocurrency schemes.”

In response, Selig—who last year said he’d leave it up to Trump as to whether the CFTC needed additional resources to oversee digital assets in addition to its other duties—claimed the CFTC has “appropriate resources throughout the country” and argued that federal agencies “don’t operate like Starbucks. Most of our attorneys are at headquarters in Washington.”

Back to the top ↑

Fairshake opens its wallet

During last week’s House hearing, Rashid Talib (D-MI) asked Atkins whether it was a coincidence that many of the firms that benefited from the SEC’s crypto enforcement pullback were also major “donors or supporters of President Trump” both during the 2024 election cycle and afterward.

Atkins didn’t take Talib’s bait, saying only that “we take our duties seriously on enforcement investigations and rulemaking.” An unimpressed Talib said she “can’t fault anyone who thinks your agency is bought and paid for.”

Talib’s timing was impeccable, as the Fairshake political action committee (PAC) and its affiliated groups almost immediately announced their first confirmed initiatives of the 2026 election cycle.

On February 10, Fairshake’s pro-GOP affiliate Defend American Jobs announced that it was spending $5 million to support the Republican primary campaign of Rep. Barry Moore (R-AL). Moore is running for the Alabama Senate seat being left vacant by Tommy Tuberville, who’s running for the state’s governorship. 

Moore has already received Trump’s primary endorsement, and Defend American Jobs’ first ad spot highlights the president’s support. Moore has also received the blessing of Sen. Cynthia Lummis (R-WY), a noted crypto supporter who’s retiring rather than run for re-election in November.

In her endorsement, Lummis noted that Moore is one of the few members of Congress “to personally own crypto assets.” Moore himself has said crypto is about “freedom, privacy and opportunity, values that conservatives should defend.” Defend American Jobs called Moore “a leader who will fight for economic growth and make America the crypto capital.”

On February 12, the New York Times reported that Fairshake’s pro-Dem offshoot Protect Progress was spending $1.5 million to defeat Rep. Al Green (D-TX), who is running against fellow Rep. Christian Menefee in a Dem primary after Green’s district was eliminated during the state’s pro-GOP gerrymandering effort. The primary will determine which Dem will compete for the redrawn TX-18 district come November.

The crypto sector has long wanted to rid itself of Green, a member of the House Financial Services Committee who holds an ‘F’ rating from the astroturf group Stand with Crypto (SwC), indicating his ‘strongly against crypto’ stance.

Menefee, who was only sworn in to Congress this month after winning last year’s special election to replace the late Rep. Sylvester Turner, holds an ‘A’ rating with SwC. This rating appears to be based on a single statement, which itself appears to be based on Menefee filling out a SwC questionnaire with all the correctly deferential responses. Menefee currently holds a solid lead over Green in early primary polling.

Fairshake spokesperson Josh Vlasto claimed Green “has decided to try and stop American innovation in its tracks” and is “actively hostile towards a growing Texas crypto community.” Green subsequently posted a video to Facebook warning that voters “cannot allow the crypto industry to own Congress” and that he was “ready to take on” Big Crypto.

Last month, Fairshake revealed that it has $193 million to spend in the current election cycle, significantly more than it spent in 2024, when it was (rightly or wrongly) credited with moving the needle on a number of races.

Critics have called out Fairshake and other crypto-focused PACs for rarely mentioning digital assets in their pro/con campaign spots, questioning their claims to be seeking to motivate the allegedly massive numbers of single-issue crypto voters.

Back to the top ↑

Watch | Teranode explained: BSV leaders on blockchain scaling & the future of digital economy