Key takeaways
- Galaxy CEO Mike Novogratz predicts a crypto bill will pass within weeks, thanks to bipartisan interest despite disagreements over stablecoin provisions.
- A compromise on stablecoins is expected, which may not fully satisfy the crypto industry but would allow the sector to grow.
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Galaxy CEO Mike Novogratz expects the crypto market structure bill to pass within weeks, with a compromise on stablecoins that may not fully satisfy the crypto industry, but would allow the sector to progress and grow under clear regulation.
Speaking on CNBC’s “Squawk Box” this morning, Novogratz said that despite continued disagreements over stablecoin provisions, there is genuine bipartisan interest in reaching an agreement from both Democratic and Republican senators.
“I basically think a bill will be passed in the next few weeks,” Novogratz said during the interview. “Democratic senators seriously want something done. Republican senators seriously want something done.”
The Galaxy founder identified stable interest payments as a central sticking point, with banks lobbying against provisions that could trigger a deposit flight.
“If you go to JP Morgan right now, Bank of America or any of the big banks, you put money in a savings account, you get about 11 basis points or one basis point,” Novogratz said. “They are concerned that stablecoins could experience deposit leakage.”
He argued that banks are using community banks as a shield to protect their margins, noting that consumers could already turn to neobanks offering better rates if deposit flight was a real concern.
Novogratz noted that overly restrictive rules could consolidate existing monopolies, making it difficult for new compliant stablecoins to compete, and stressed that some incentives or returns would be needed to drive innovation and global adoption.
“If you don’t allow some interest or mechanism to generate interest on stablecoins, you’re going to continue with this monopoly where Tether owns the majority of stablecoins overseas,” Novogratz noted.
“I think there will be a compromise on this. I don’t think it will be great for crypto, but I think it will be fine,” he said. “We need to get this bill passed so we can move forward and the industry can start to grow.”
Banks and crypto companies clash over stablecoin rewards as Senate crypto bill hits roadblocks
The bill, intended to establish rules for the crypto industry and clarify market structure, was expected to go before the Senate Banking Committee this week. However, the hearing was canceled at the last minute after some lawmakers objected to key provisions and Coinbase withdrew its support.
Coinbase CEO Brian Armstrong has raised concerns about the latest project, including a reduced role for the CFTC and limitations on crypto companies offering interest-like rewards on stablecoins.
https://twittercom/brian_armstrong/status/2011545247105355865?s=20
Following the rollback of the markup, Senate Democrats are expected to resume discussions with the crypto industry on Friday to resolve unresolved issues.
Banks fear that allowing stable rewards will siphon away hundreds of billions of deposits.
Bank of America CEO Brian Moynihan warned during this week’s earnings call that up to $6 trillion could leave the U.S. banking system if stablecoin issuers pay interest.
