The Digital Asset Market Clarity Act, a landmark bill aimed at bringing crypto assets into the economic mainstream, is on life support. That is despite months of work and compromise behind a set of rules that would, supporters say, create new business opportunities and reduce the risk of another FTX. The bill cleared the House with bipartisan support in July 2025 and would divide oversight of digital assets between the Securities and Exchange Commission and the Commodity Futures Trading Commission, but the Senate has yet to take it up, and a bill that dies in this Congress would have to be reintroduced and start the process over. Polymarket currently puts the odds of passage this year at 25%.

Clarity has struggled to reach the finish line for several reasons, but its biggest obstacle has arguably been the aggressive lobbying campaign mounted by the banking industry. Banks have objected to the fact that the Genius Act — an important stablecoin law passed last year and signed into law in July 2025 — only bans direct interest payments to customers. That left room for third parties to reward customers who use stablecoins such as USDC, which is issued by Circle, a company that itself went public on the New York Stock Exchange in June 2025. Coinbase, which shares in the token’s reserve income, already distributes rewards to USDC holders — exactly the arrangement banks want curtailed. Clarity was not meant to be a stablecoin bill, but banks were not satisfied with the protections they had already secured and instead held Clarity hostage.

If the tactics used in the campaign were not so forceful, one might assume American banks were under serious pressure. The way they have fought the stablecoin issue suggests deposits are scarce and profits are weak, and that the industry needs government protection to survive. That helps explain the unusual coalition the banks assembled against stablecoin yield, ranging from progressive think tanks to The Wall Street Journal editorial board. The banks’ opponents are hardly marginal either: crypto firms and executives ranked among the largest sources of corporate campaign money in the 2024 election cycle, one reason digital-asset legislation has advanced as far as it has.

In reality, the banking sector remains strong. Profitability is up and the regulatory burden is down, two reasons the KBW Bank Index has outperformed the NASDAQ over the past year. At the center of the current boom is the $740 billion in net-interest income, or NII, that the industry earned last year, according to government data.

NII is the clearest measure of what banks make by taking money from depositors and lending it to borrowers. At roughly three-quarters of a trillion dollars, it is a very large number — larger than Australia’s GDP and larger than what the Magnificent Seven — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — earned in net income during the same period. Few would argue that Alphabet and Nvidia need legal protection from competition, yet many people appear to believe that banks, which are even more profitable, do need such protection. In that view, J.P. Morgan, which made almost $100 billion in NII last year, might be forced out of banking if crypto users on Coinbase earn a little extra on their USDC balances.

Banks rarely frame the issue that way. Instead, they warn that “competition for deposits may erode the banking industry’s ability to create credit, hurting farmers and small businesses.” But that claim is difficult to square with how most banks operate. JPM currently pays nothing to depositors, but charges close to 20% for credit card loans. It is hard to believe the bank would stop issuing credit cards if it had to pay depositors slightly more interest.

There has never been a credible academic argument that even direct remuneration to stablecoin holders would deplete bank deposits. The Genius Act’s ban on direct interest payments was based more on myth than on evidence. Stablecoins are a private form of money, and private forms of money eventually cycle back into bank deposits. That is what happened with money market funds, another savings product that banks fought with dubious arguments and ultimately failed to stop. Trillions of dollars flowed into those products over time — money-market funds now hold more than $7 trillion — yet bank deposits are higher than ever.

In its campaign against Clarity, the banking lobby has also avoided mentioning that banks account for only 20% of credit creation in the United States, and that the largest banks lend out only about half of the money they receive in deposits. It has said little about how banks are more likely to park deposits at the Federal Reserve or buy Treasuries than make small-business or farm loans. It has also sidestepped the industry’s recurring crises, which have forced the government to step in with bailouts costing billions of dollars.

Another inconvenient fact is that savers would benefit from competition for deposits, and there are more savers than borrowers. Yet instead of addressing these points, trade groups representing the largest banks argue that stablecoins threaten community banks, even as the biggest institutions continue to attract deposits through their “too big to fail” status.

The result is puzzling. The industry is highly profitable and benefits from various subsidies, yet it behaves as if it is doing the public a favor. It has some of the most powerful lobbyists in Washington, and they spend much of their time pushing for less regulation — except when it comes to stablecoins, which they would like to see regulated out of existence.

Banks also regularly argue against giving fintechs and crypto firms equal access to government-run infrastructure, citing safety and soundness concerns. The industry that produced Lehman Brothers and SVB — whose 2023 collapse led regulators to guarantee all of its deposits, beyond the usual $250,000 insurance cap — would have people believe that PayPal is the real danger. It also wants crypto to be treated as an unusually strong enabler of illicit activity, as if no bank has ever moved money to facilitate wrongdoing.

The author says he has spent a great deal of time thinking about why America is so attached to its banks, even though the banks do not appear to return that affection. He suggests it may resemble Stockholm syndrome: the country has been tied to one industry for so long that it struggles to believe alternatives exist. In his view, that kind of one-sided loyalty usually ends badly. What begins as longing can eventually turn into anger.

He argues that the same logic banks use against competition could also justify tougher restrictions on banks themselves. One example would be an American cap on credit card swipe fees, as already exists in Europe — where regulators cap credit-card interchange at 0.3% of each transaction — and Australia. Another would be a windfall tax on net-interest margins. If banks enjoy a monopoly on interest-bearing deposits, he argues, they should be forced to pass savings through to borrowers instead of keeping it as profit. Congress could also reinstate Glass-Steagall, the Depression-era law that for decades barred retail banks like J.P. Morgan from engaging in risky trading until its repeal in 1999. Separating core banking from other activities, he says, would be the best way to protect Americans from the risks banks say they fear at fintechs and crypto firms.

During the stablecoin debate, the banking industry has repeatedly argued that it should be treated like a utility performing an essential social service. The author says it should not be surprised if the populist forces reshaping the rest of the economy eventually decide to treat it that way.

Omid Malekan is an adjunct professor at Columbia Business School and the author of several books on crypto and finance. The opinions expressed here are entirely his own.

This story was originally featured on Fortune.com.