Davos Cold Shoulder: Big U.S. Banks Push Back on Coinbase Over Stablecoin Rules

Brian Armstrong went to the World Economic Forum to press a narrow but high-stakes point: pending U.S. legislation will determine whether crypto firms can offer recurring payouts on stablecoins that resemble interest. Rather than productive engagement, he encountered terse rebukes or flat refusals from several top U.S. bank executives, a dynamic that highlights how incumbent financial institutions are mobilizing to shape statutory lines. The dispute centers on repeat rewards paid to holders of tokens such as USDC — products that some platforms have pitched with yields up to roughly 3.5% — and which bank leaders say could siphon deposit funding that supports lending, especially at regional banks. Armstrong framed Coinbase’s position as a contest over competition and consumer choice, while bank chiefs stressed the potential hit to net interest margin and community lending if deposits migrate to tokenized alternatives. The Davos run-ins came as Capitol Hill negotiations are in flux: a physical Agriculture Committee markup on stablecoin market‑structure language was scheduled for Jan. 29, and the White House has organized a targeted convening of bank, exchange and trade‑group representatives to seek technical compromises. That process has been complicated by shifting industry endorsements and by at least one paused markup after major players recalibrated support. Regulators are also working to coordinate across agencies — including planned SEC–CFTC engagement — to avoid overlapping jurisdictional signals, even as ongoing enforcement actions against developers and non‑custodial tools inject legal risk for builders. Independent analyses from large banks and global lenders have quantified the channel risk: if reserves tied to stablecoins are not redeposited into domestic banks, issuance can act like a sustained withdrawal of retail deposits, hitting regional institutions hardest. Despite the public frosty exchanges, commercial relationships between big banks and crypto platforms persist, underscoring that negotiation and partnership will continue alongside lobbying. For lawmakers, the choice of statutory wording — from definitions of custody and custody carve‑outs for developers to explicit limits on interest‑bearing stablecoins and issuer eligibility — will effectively set the competitive rules for who may scale yield‑bearing on‑chain products. The outcome will shape where product activity concentrates: a bank‑centric regime would channel much activity through regulated banks and compress margins for exchanges, while a more permissive, clearly regulated path could enable broader non‑bank offerings but raise supervisory questions about deposit stability and monetary transmission. In short, the Davos scenes were both a positional signaling exercise and a preview of the bargaining that will determine how deposit‑like digital instruments are treated in U.S. law.