Banks versus Crypto: Who actually wins

Published February 19, 2026

 

Fear. Uncertainty. Doubt. (FUD) These could easily be natural reactions to (or the reason for) the banking sector’s latest offensive against cryptocurrency. While we can work to clear the fog of confusion, the other emotions may be entirely justified – though perhaps not for the reasons being promoted.

It has become “cool” to hate crypto. During the Super Bowl, social media captured crowds happily singing along during a commercial only to erupt in derision the moment the Coinbase logo appeared. For many, this crypto-hate is a fashion statement. Of course, if you bought crypto at the peak last summer, the last six months have been brutal. Given that volatility and the very real threat of scams, the current negativity is understandable.

But what if that anger is misplaced? What if those claiming to protect you are actually protecting their own interests? The banking industry has launched an aggressive, not-so-quiet war against crypto, and the crypto exchange company Coinbase is right in the crosshairs. While claiming to be shielding consumers and the larger economy, the real priority for banks appears to be defending a business model that relies on underpaying you for the use of your own money.

And, let me make it clear. I’m not saying anything bad about your or my favorite banker. They’re operating within a system that was handed to them. God bless them, and you’ll see I want the best for them and us.

To understand today’s hostility, we must look back to the 1970s. At that time, banks operated under Regulation Q, a federal rule that capped the interest rates they could pay savers. When inflation spiked, Americans lost money by keeping their funds in banks.

When Money Market Funds emerged in the 1970s offering higher yields, the banking sector didn’t compete; banks tried to eliminate them. They lobbied to ban the funds, claiming they would “destroy the financial system.” Today, the Independent Community Bankers of America (ICBA) is using a similar playbook, labeling Coinbase CEO Brian Armstrong as “Public Enemy Number One.”

The math banks hope you ignore is simple. You might get the national average savings rate return of 0.5%. The Federal Reserve pays banks 3.65% on the reserves (your money) they hold. This “spread” is their primary profit engine. While some “high-yield” accounts offer 4-5% to lure in new customers, most people are left with crumbs while the bank keeps the rest.

Now, the crypto industry has introduced stablecoins which are digital tokens designed to mirror the U.S. dollar one-to-one. When you purchase a stablecoin like USDC on an exchange like Coinbase, that money isn’t just sitting in a vault. By law, it must be backed by high-quality assets like U.S. Treasuries.

Here is where the “trick” becomes a threat. While traditional banks make money on your deposits, many crypto platforms are passing a significant portion of that yield directly back to you, often around 3-3.5%. By cutting out the middleman and sharing the profit, they aren’t just offering a new product – they are undermining the multi-trillion dollar “spread” that banks have relied on for decades.

To be fair, the traditional banking system plays a vital role in our local economies by using your deposits to fund loans for small businesses, farmers, and homeowners. This fractional banking model inserts capital back into the community to enable growth. The concern is that if savers move their funds into stablecoins to capture higher yields, local banks will be left with a smaller pool of money to lend. 

This creates a difficult trade-off: is the personal gain of a 3+% return worth the potential “drain” on local credit? Research suggests this could reduce deposits by $500 billion to $6 trillion, harming lending. In answering this question, just remember that you are currently likely losing value against inflation. That’s a problem. 

New technology is typically greeted with fear before it is understood. As a technologist, I find it tragic that many don’t realize Bitcoin was created specifically to return power and sovereignty to the general public. Its “fairness” comes from the fact that it is governed by immutable code and community consensus, not by individuals, corporations, or governments. Because no one can unilaterally manipulate or control it for their own benefit, it is inherently terrifying to those who currently hold the levers of financial power. While stablecoins are not Bitcoin, they were born within the same mindset.

What we are witnessing today is simply the struggle of the powerful trying to suppress a system that undermines their control. This barrier of misunderstanding can only be broken by personal curiosity. Look deeper for yourself! Once you go down the crypto “rabbit hole,” many determine this technology will possibly lead to the fairest, most capable financial systems ever created.

There is a deep irony in the current anti-crypto crusade. It’s possible that the small banks are being influenced by the “overlord” mega-banks that currently control the larger ecosystem. Are small banks being used as pawns to protect a status quo that primarily benefits the giants? 

Instead of fighting the technology, local banks could embrace the technology they need to break free and thrive, even as the stablecoin problem may be a real risk. I simply don’t have the space here to detail the possibilities, but there are strong options waiting to be figured out.

Digital financial services will increase and it would be fantastic if local banks start offering the general public capabilities that have historically only been available to the wealthy elite. Figuring out how to provide powerful 24/7 services to normal people at a fraction of the historical cost is a growth opportunity. The relationships and trust can remain, keeping existing customers loyal to their community bank.

The “public enemy” narrative is likely a calculated distraction, just like it was in the 1970s. The real battle is over who keeps the interest on your capital: you or the bank? History suggests that you cannot legislate against the demand for yield. In reality, we can only choose whether that yield stays in the regulated U.S. market or moves offshore. 

The technology is here. Crypto fans say “Don’t listen to the FUD.”  I say pay attention to the engineered Fear, Uncertainty, and Doubt flooding the news, and figure out what’s really going on. It’s likely not what they’re telling you.

And beyond this, let’s see what’s next!

 

J Matt Wallace