Monopoly Round-Up: The Slow Death of Banking in America

Last week’s canceled markup in the Senate Banking Committee revealed a striking new political reality: the traditional banking lobby and the ascendant, donor-powered crypto industry are now in open conflict. The immediate result is stalemate. The longer-term stakes are bigger: whether the American system of community banking gives way to a new model built around speculative finance and tech-flavored shadow banking.

The Capitol Hill showdown

Lawmakers were set to advance low-profile legislation reshaping financial rules when negotiations collapsed. At issue is a zero-sum fight over the most valuable resource in finance: cheap, stable deposits. Crypto firms want the privileges of the banking franchise—especially the ability to collect dollar deposits and pay yield on them via “stablecoins.” Community and regional banks see that as an existential threat to their funding base.

For now, neither side has the votes to force a win. The banking lobby still has deep local roots and credibility with many Senators. The crypto industry has a powerful political machine and a legion of online influencers. Both are pushing hard, and both understand the outcome could reset who controls payments and credit in America.

How we got here

America once relied on a vast web of local banks—roughly fourteen thousand after World War II—to finance homes, small businesses, and community life. Starting in the 1980s, a wave of deregulation and consolidation shrank that network to a few thousand institutions, even as finance shifted toward national capital markets, credit cards, and megabanks. Local economies still rely on community lenders, but there are fewer of them every year.

Banking basics haven’t changed: banks create loans and then finance them with deposits, which are government-guaranteed. The spread between what banks pay depositors and what they earn on loans and safe assets is the core of their profits—an arrangement made viable by public backstops and, in exchange, public oversight. Think of banks as government-licensed franchises: private actors carrying out a public function.

Crypto’s rise—and collision with banking

Crypto grew alongside the consolidation and complacency of mainstream finance. It promised an alternative to state-backed systems, but in practice, it thrived during easy-money bubbles and floundered when frauds and failures surfaced. Even after high-profile collapses in 2022, the industry retained political momentum, aided by significant campaign spending and a deregulatory mood in parts of Washington. Enforcement remained uneven; the industry pivoted from anti-state rhetoric to demands for access to state-backed privileges.

Congress’s first big move was a law effectively authorizing stablecoins as dollar-backed instruments while largely barring interest on them. That detail matters: if stablecoin issuers can pay interest, they can compete head-on with banks for deposits. Some firms already offer “rewards” that look like interest by another name, hoping to find a loophole. The follow-on bill—dubbed the “Clarity Act”—sought to settle those questions and relax rules around speculation. The markup was canceled when the fight over paying interest (or “rewards”) became impossible to paper over.

Why it matters

Community banks finally mobilized, warning that allowing crypto platforms to pay yield on stablecoin balances could drain deposits out of the banking system and into lightly regulated venues. Treasury analysts have raised alarms that a large share of deposits could decamp if the playing field tilts. For smaller banks, deposits are lifeblood; for crypto exchanges, they’re the path to permanent, cheap funding.

Here’s the crux: if crypto firms can pay interest, they gain a decisive competitive edge over local banks; if they can’t, their growth remains tethered to speculative trading rather than everyday finance. There’s no obvious middle ground—only winners and losers.

The cultural backdrop

American culture has long distrusted distant control of credit while celebrating local lenders who know their communities—think George Bailey versus Mr. Potter. That intuition remains sound: local control supports resilience and self-governance, while distant, concentrated power often breeds extraction and instability. The question is whether the country will cede more of its financial plumbing to platforms built for speculation rather than productive lending.

Choosing the least bad option

There are no heroes in this fight. Big-bank oligopolies and junk-fee models are real problems. Still, local and regional banks lend into communities and operate under meaningful supervision. Crypto’s record—repeated boom-busts, fraud, and evasion—suggests that integrating it into core finance would ultimately socialize its risks while privatizing its gains. If checks and balances delay that outcome, even temporarily, that’s a feature, not a bug.

The broader monopoly picture

• Antitrust leadership: A billionaire has been nominated to a key role at the Federal Trade Commission, raising questions about the direction of competition policy.
• Silenced enforcers: Senior antitrust officials at the Department of Justice have reportedly been restricted from public speaking, signaling a chill on transparency.
• Canada-China trade: Canada moved to allow imports of Chinese electric vehicles in exchange for expanded agricultural exports, a shift that could weaken North America’s auto supply chain and hasten Chinese dominance in EVs.
• The “Mamdani effect”: In New York City, reports suggest landlords are cleaning up their act amid a reform-minded push and stronger local enforcement signals.
• Corporate drama: Entertainment giants continue to consolidate and spar over strategy, with conflicting views on the rationale for major acquisitions.
• Legal headlines: A high-profile lawsuit involving a former senator drew attention, adding to the week’s swirl of political and corporate intrigue.

The takeaway

Washington’s crypto-versus-banking standoff is about who controls credit, deposits, and the payments system. For now, the clash has slowed a sweeping deregulatory push, illustrating how rival power centers can restrain one another—even when neither represents a truly public-interest vision. Until a more democratic, productive financial architecture emerges, stalemate may be the most responsible outcome available.