The news: Senior executives at JPMorgan and Bank of America (BofA) unloaded on interest-bearing stablecoins or stablecoin rewards in their banks’ earnings calls earlier this week.

• JPMorgan CEO Jamie Dimon said that allowing a "parallel banking system” of deposit-like products outside of a regulatory framework would introduce risks for consumers and the financial system.
• BofA CEO Brian Moynihan argued that interest-bearing stablecoins could pull trillions of dollars from bank deposits, impairing their ability to lend.

Why it’s worth watching: A lobbying war has ensued over a bill introduced in the Senate that would formalize a cryptocurrency regulatory framework. In response to the bill, the American Bankers Association and allied trade groups published a letter vehemently opposing yield and rewards on stablecoins. Soon thereafter, Coinbase withdrew its initial support for the bill, and the legislation appears to have stalled. Draft amendments would ban “interest” or rewards on stablecoins, eliminating a tool used by the stablecoin industry and diminishing a competitive threat to banks.

Zoom out: President Donald Trump signed the GENIUS Act in July—the first legislation that explicitly regulated the crypto industry. Banks and fintechs were both beneficiaries, and with regulatory clarity, financial institutions (FIs) are finally pushing into stablecoins. At the same time, the crypto industry has sparked another fight with the banking industry as many crypto firms apply for trust charters.

Implications for banks: The crypto industry has long been at least a step ahead of regulators and Congress, and banks have had to let the trend play out.

With a regulatory framework starting to take shape, crypto and banking are becoming increasingly intertwined as FIs expand their digital assets offerings and crypto firms apply for and acquire banking licenses. But this new paradigm hasn’t fully crystallized: The balance of power will continue to evolve alongside laws and regulations.