Key Takeaways
- Galaxy CEO Mike Novogratz predicts a crypto bill will pass in 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 enable the sector’s growth.
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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 regulatory clarity.
Speaking on CNBC’s ‘Squawk Box‘ this morning, Novogratz said that despite ongoing disagreements over stablecoin provisions, there is genuine bipartisan interest in reaching a deal from both Democratic and Republican senators.
“I fundamentally think a bill is going to get done in the next few weeks,” Novogratz said during the interview. “The Democratic senators in earnest want to get something done. The Republican senators in earnest want to get something done.”
The Galaxy founder identified stablecoin interest payments as a central sticking point, with banks lobbying against provisions that could trigger deposit flight.
“If you go to J.P. Morgan right now or 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 worry that stablecoins could have deposit flight.”
He argued banks are using community banks as a shield to protect their margins, noting consumers could already move to neobanks offering better rates if deposit flight were a genuine concern.
Novogratz noted that overly restrictive rules could entrench existing monopolies, making it difficult for new, compliant stablecoins to compete, and emphasized that some incentives or yields would be necessary to foster innovation and global adoption.
“If you don’t allow some interest or some mechanism to generate interest on stablecoins, you’re going to continue with this monopoly where Tether has the majority of overseas stablecoins,” Novogratz noted.
“I do think that there will be a compromise on this. I don’t think it will be great for crypto, but I think it’ll be fine,” he said. “We’ve got to get this bill passed so we can move on, and the industry can start growing.”
Banks and crypto firms clash over stablecoin rewards as Senate crypto bill hits obstacles
The bill, intended to set rules for the crypto industry and provide clarity on market structure, was scheduled for a Senate Banking Committee markup this week. However, the hearing was canceled at the last minute after some lawmakers opposed key provisions, and Coinbase withdrew its support.
Coinbase CEO Brian Armstrong cited concerns with the latest draft, 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 cancellation of the markup, Senate Democrats are set to resume talks with the crypto industry on Friday to address unresolved issues.
Banks are worried that allowing stablecoin rewards could divert hundreds of billions from deposits.
Bank of America CEO Brian Moynihan warned on this week’s earnings call that up to $6 trillion could leave the US banking system if stablecoin issuers pay interest.