Banks Try to Prevent Crypto Platform Competition, Fed Ends Special Monitoring for Banks in Crypto (#220 – 17 Aug 2025) Powered by T-REX

1. Banks try to prevent crypto platform competition

The American Bankers Association (ABA) issued a letter asking Congress to make it very difficult for crypto firms to compete with banks.

This is a very interesting development.

The U.S. GENIUS Act provides a comprehensive framework for stablecoins. In that legislation, stablecoin issuers are not allowed to offer yield. This was included after lobbying from the banking industry (especially smaller and regional banks), to ensure that issuers like Circle or Tether don’t compete directly with banks.

However, whilst stablecoin issuers cannot offer yield, crypto platforms can. They do this by borrowing from customers at x% and lending at x%+y% — very similar to how traditional fractional banks operate.

This is a clear effort from banks to slow down competition. But the reality is that many people, especially younger generations, are far more comfortable dealing with crypto platforms than legacy banks. For example, I personally believe that crypto platforms are more transparent than banks. And let's not even get started on UX/UI.

And the fact that this letter is signed by almost every major U.S. banking association shows how much of a threat crypto platforms pose.

This reminds me of how taxi drivers tried to block Uber — and we all know how that ended.

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2. U.S. Fed sunsets special monitoring program for banks in crypto

The Federal Reserve announced that it will sunset its “Novel Activities Supervision Program”, launched in August 2023 to oversee banks engaging in crypto activities.

This program was viewed negatively by the crypto industry, as it created major challenges for banks entering the space. It acted as a deterrent, introducing new compliance burdens at a time when the financial upside of crypto was still uncertain.

On Friday, the Fed confirmed it is ending the program and will monitor banks’ crypto activities through its standard supervisory process instead.

The official reason: the Fed has “strengthened its understanding of those activities, related risks, and bank risk management practices” since 2023.

This is a positive development for the U.S. crypto ecosystem. Let’s not forget that back in April 2025, the Fed also withdrew its earlier guidance that discouraged banks from participating in crypto and stablecoin activities.

3. Crypto and FinTech execs ask Trump to ban bank fees for customer data

Following open banking initiatives, customers can now ask their bank to share their own data with external firms. This is meant to drive financial innovation that benefits consumers.

But big banks are not happy, as this could cut into their lucrative business lines by making it easier for customers to use FinTech firms for their front end and relegate banks to the boring (and less lucrative back end). This is a topic I have been talking about for years, starting with this TEDx talk on the future of finance from 2016!

Many banks have tried to slow progress — including by charging fees for data sharing.

Now, over 80 FinTech and crypto CEOs have written to President Trump, asking him to rein in the banks.

This is particularly relevant for U.S. crypto firms, which want access to customer data.

I’m personally a big believer in open banking and think it should be mandatory in most countries. Banks should be allowed to charge reasonable fees, but there must be oversight or limits on those fees.

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Henri Arslanian

*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with. This newsletter is for educational purposes only, and none of its content should be construed as investment or financial advice of any kind.