Trump takes on the banks: What the stablecoin war means for Bitcoin

Bitcoin does not move in a vacuum. Behind every price surge there is a confluence of forces; regulatory shifts, institutional appetite and macroeconomic anxiety, and the rally of the past ten days has had all three in abundance. 

From a low of around $63,000 on 24 February, Bitcoin climbed to nearly $73,000 during 5 March, a recovery of more than 15% that caught many off guard given the broader uncertainty hanging over global markets. To understand where it goes from here, you have to understand the battle now playing out between the White House, Wall Street and the crypto industry.

At the centre of it is stablecoins, and specifically, whether crypto firms should be allowed to offer interest-like returns on them. 

Trump picks his side

In a late-night Truth Social post on Tuesday, President Donald Trump did something unusual even by his standards: he directly attacked the banking industry on behalf of crypto. 

‘The Genius Act is being threatened and undermined by the Banks, and that is unacceptable,’ he wrote, before demanding that banks ‘make a good deal with the Crypto Industry’ in the interests of the American people. 

He added: ‘Americans should earn money on their money.’

The post came shortly after Trump met privately at the White House with Coinbase CEO Brian Armstrong, a meeting that (apparently, according to sources with knowledge of it) appears to have directly shaped the president's public positioning. Armstrong has been the most prominent voice arguing that Americans should be able to earn yield on stablecoin holdings, and the language in Trump's post seemed close to phrasing Armstrong has used in past public interviews.

The reaction in markets was immediate. Coinbase shares surged as much as 15% in midday trading on Wednesday. Strategy, the Bitcoin treasury company, spiked more than 10%. JPMorgan and Bank of America fell, but only marginally, a sign that markets see this as a win for crypto rather than a direct blow to the banks.

$6.6 trillion question

The banks are not wrong to be alarmed. Executives from JPMorgan and Bank of America have pointed to a Treasury Department study suggesting that if stablecoins were permitted to offer yield, US banks could lose up to $6.6 trillion in deposits. 

This is not a rounding error. For smaller regional lenders in particular, a sustained outflow of that scale could threaten their ability to fund loans to businesses and households, a systemic risk that Jamie Dimon has been vocal about. The JPMorgan CEO told CNBC that ‘if you do that, the public will pay. It will get bad.’ 

The crypto industry's counter-argument is that stablecoins backed by U.S. Treasuries would actually boost demand for American sovereign debt, and that the risks are contained within a well-regulated framework. 

The Clarity Act, which acts as a companion bill to the Genius Act passed last year, is intended to provide exactly that framework, establishing clear rules for how crypto tokens are overseen by market regulators. But its passage has stalled, held up primarily by this single, enormously consequential dispute over yield.

Now, Trump's intervention has shifted the political calculus significantly. 

With Republicans controlling Congress and the president now explicitly backing the crypto side, the legislative path forward is clearer than it was. That said, it is far from guaranteed; Trump tried earlier this year to pressure banks into capping credit card interest rates, and the industry successfully marshalled enough bipartisan opposition to see off that threat. A repeat performance can’t be ruled out.

Geopolitics adds fuel to the fire

Washington's crypto drama has not been unfolding in isolation. Global financial markets continue to absorb the shockwaves of the US-Israel military campaign against Iran, which resulted in the killing of Iran's Supreme Leader and the deaths of several American service members. 

The conflict has injected a new layer of geopolitical risk premium into asset markets. And historically, that kind of uncertainty tends to benefit assets perceived as stores of value outside the traditional financial system.

Gold has benefited. So has Bitcoin. In times of geopolitical dislocation, particularly when the US dollar faces questions about its reserve currency status and when sovereign debt issuance accelerates to fund military engagement, hard-capped, decentralised assets can become more attractive to a certain class of investor. 

The narrative of Bitcoin as digital gold, long contested, has had renewed oxygen breathed into it by the Iran conflict. That narrative alone does not sustain a rally, but layered on top of genuine regulatory progress and strong ETF inflows, it has been a meaningful accelerant.

What comes next for Bitcoin

The near-term outlook for Bitcoin hinges on two things: legislative progress in Washington, and the ability of the broader market to absorb any further geopolitical shocks without triggering a risk-off selldown.

On the legislative front, analysts are cautiously optimistic. Dominick John of Zeus Research noted this week that crypto equities are repricing as regulatory risk is ‘fundamentally redefined,’ with the executive branch now championing a clear digital asset framework. ‘The trend will persist as regulatory clarity strengthens and institutional flows accelerate,’ he said, pointing to robust spot ETF inflows as further evidence that institutional demand is not wavering. 

The passage of the Clarity Act, even in a modified form that finds middle ground on the yield question, could be received as a significantly bullish catalyst.

But the risks are real and should not be dismissed. Pav Hundal, lead analyst at Swyftx, was characteristically direct in his assessment: ‘Things change quickly with this White House. If we see this regulatory debate go stale, or hit a wall, or Bitcoin is hit, it's not hard to imagine a correction.’ 

The conflict-of-interest questions surrounding Trump's involvement add another layer of complexity. The President and his family have generated hundreds of millions of dollars from interests in crypto firms, including World Liberty Financial. His meeting with Armstrong hours before publicly backing 

Coinbase's position will also attract scrutiny. 

Congressional Democrats are unlikely to let it pass without comment, and any serious investigation into the relationship between the White House and the crypto lobby could introduce noise that unsettles markets.

The bigger picture

Strip away the political theatre and what remains is arguably historic moment for crypto. 

The sitting U.S. president has publicly challenged the most powerful banking lobby in the world on behalf of a digital asset industry that, just a few years ago, was being warned it would face extinction through regulation. 

The regulatory architecture being constructed (the Genius Act, Clarity Act, CFTC and SEC frameworks) represents the kind of institutional legitimacy that Bitcoin advocates have argued for since its inception.

Whether the $71,000 level holds or becomes a springboard for a push toward and beyond previous all-time highs depends on execution. The legislation needs to pass. Institutional inflows need to continue. And the geopolitical situation needs to avoid escalating in ways that trigger the kind of broad risk-off environment that tends to drag crypto down alongside equities.

But the battle with the banks over stablecoin yield has finally yielded progress.

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