Original authors: Amrith Ramkumar, Dylan Tokar, Gina Heeb, The Wall Street Journal
Original translation: Luffy, Foresight News
Last week during the World Economic Forum in Davos, Brian Armstrong, CEO of the largest U.S. cryptocurrency platform Coinbase, was having coffee with former British Prime Minister Tony Blair when JPMorgan CEO Jamie Dimon suddenly interrupted their conversation.
"You’re talking nonsense," Jamie Dimon said, pointing directly at Brian Armstrong. The banker, who has long been skeptical of cryptocurrencies, previously referred to Bitcoin as a scam.
According to insiders, Jamie Dimon's main point was to demand that Brian Armstrong stop spreading false statements on television. Earlier that week, Brian Armstrong publicly accused the banking industry on several business television programs of trying to obstruct the legislative process for establishing a new regulatory framework for digital assets.
This confrontation was at odds with the Davos Forum's intention to promote cooperation among global leaders.
As cryptocurrencies rapidly integrate into the U.S. financial mainstream, Wall Street giants have finally recognized the threats posed by this sector. Although banking institutions have accepted some applications of cryptocurrencies, such as providing services for clients' Bitcoin investments and using digital assets to enhance the efficiency of fund transfers, they have drawn a clear line when it comes to their core business of personal deposits.
Currently, there is a fundamental disagreement between the banking industry and Coinbase on a core issue: whether cryptocurrency exchanges have the right to pay regular yields to users holding digital tokens. These so-called yield rewards refer to the continuous fees paid to stablecoin holders, with interest rates around 3.5%.
CEO of Bank of America Brian Moynihan, CEO of JPMorgan Jamie Dimon
The banking industry believes that the yields paid by cryptocurrency exchanges to users are essentially no different from bank deposit interest. With interest rates on bank checking accounts typically below 0.1%, far lower than cryptocurrency yield levels, the banking sector is concerned that consumers will shift their funds en masse into the cryptocurrency market. They claim this trend will severely impact community banks and affect the availability of corporate loans. Meanwhile, Brian Armstrong and other industry practitioners argue that the market should follow the principles of free competition, and if banks want to compete with stablecoins, they can simply raise deposit rates or directly enter the stablecoin business.
The legislation known as the "Clarity Act" could reshape the future landscape of everyday financial services, covering core areas such as bank deposits and electronic payments.
According to insiders, to facilitate a compromise between the two sides, the White House plans to convene talks between banking and cryptocurrency industry groups this Monday, with David Sacks, the Trump administration's commissioner for artificial intelligence and cryptocurrency affairs, expected to attend. Some insiders have indicated that Coinbase's U.S. policy director Kara Calvert is also on the attendee list.
43-year-old Brian Armstrong co-founded Coinbase in 2012 and has led the cryptocurrency industry in seeking legalization and mainstream recognition over the years. As the head of this company, valued at approximately $55 billion, Brian Armstrong holds significant influence in policy debates related to the industry, and the legislative battle in Washington is one of them. "It’s better to have no bill than to have a bad one," he stated on social media platform X the day before a Senate committee was scheduled to vote on a bill that, if passed, would effectively prohibit companies like Coinbase from paying yields to customers, potentially costing Coinbase billions. Just hours later, the vote was unexpectedly postponed, causing a stir throughout the financial community.
"The current situation is more interpreted as a confrontation between Coinbase and the banking industry, rather than a clash between the entire cryptocurrency industry and the banking sector," said Ron Hammond, policy and advocacy director at the well-known crypto market maker Wintermute.
Brian Armstrong's counterattack did not stop with his post on January 14. In subsequent television interviews, he reiterated his views, telling Bloomberg that bank lobbyists are "running around trying to shut down competitors" and accusing the banking industry of "using customers' deposits for lending without their substantial consent." Insiders described that these remarks led to several awkward encounters with various bank CEOs at the Davos Forum.
"If you want to do banking business, then just get a banking license," Brian Moynihan, CEO of Bank of America, said during a 30-minute meeting with Brian Armstrong at the main exhibition center in Davos last week. The atmosphere of the meeting was relatively friendly, but the communication remained somewhat stiff.
Citigroup CEO Jane Fraser gave Brian Armstrong less than a minute of communication time. Coinbase is a client of Citigroup and JPMorgan, and has established business relationships with several other banks.
Wells Fargo CEO Charlie Scharf was even less willing to give a minute. When Brian Armstrong approached him to talk, Charlie Scharf bluntly stated that there was nothing to discuss between them. This conversation took place while Jamie Dimon, Charlie Scharf's former boss, was not far away.
Aiming to "Replace Traditional Banks"
Brian Armstrong graduated from Rice University in Houston, majoring in economics and computer science, and is an early advocate of digital currency concepts and underlying blockchain technology. He studied the original Bitcoin white paper published in 2008 by the mysterious figure Satoshi Nakamoto, and during his time at Airbnb in 2011, he encountered many inconveniences when transferring money to South America.
These experiences laid the groundwork for him to establish Coinbase. At that time, many investors were eager to enter the cryptocurrency space but faced a core problem: there was no dedicated platform to store digital assets. The founding of Coinbase was aimed at solving this issue, and when some customers wanted to trade Bitcoin rather than just hold assets, Coinbase naturally transformed into a cryptocurrency exchange.
Coinbase started in a small apartment in San Francisco, which was also the company's first office. After another co-founder left in 2017, Brian Armstrong became the undisputed leader.
Several former colleagues interviewed by The Wall Street Journal described Brian Armstrong as shy, sometimes even struggling to communicate smoothly with some employees, and appearing awkward when reprimanding subordinates. Some former employees characterized his style as reminiscent of the Vulcans from "Star Trek," an alien race known for their calm restraint and emotional detachment.
In 2014, Coinbase CEO Brian Armstrong speaks on stage at the TechCrunch Disrupt Europe conference in London
However, Brian Armstrong has never wavered in his vision for the development of Coinbase. He positions Coinbase as a benchmark company for integrating cryptocurrencies into the U.S. mainstream market, and today, Coinbase's business scope has expanded to include electronic payments, stock trading, commodity trading, and prediction markets.
"Our ultimate goal is to become a replacement for traditional banks in people's eyes," he stated in an interview with Fox Business last year. "We want to create a super financial application that provides users with a variety of financial services."
As the business landscape continues to expand, Brian Armstrong has invested millions of dollars to build the largest lobbying team in the cryptocurrency industry. After experiencing several rounds of boom and bust in the cryptocurrency sector, Coinbase went public in April 2021, with its market value briefly exceeding $100 billion, and Brian Armstrong's personal stake reaching approximately $13 billion.
In 2021, Coinbase employees celebrate the company's IPO outside the Nasdaq in New York with champagne
After surviving the industry collapse crisis in 2022 and withstanding regulatory pressure from the Biden administration in 2023, Brian Armstrong began to launch counterattacks and gradually found his voice. This manager, who once preferred to write code in the office while wearing headphones and was reluctant to speak publicly, has now become a staunch advocate for the cryptocurrency industry in Washington, and the attitude of Washington towards cryptocurrencies is about to undergo a dramatic change.
Through a series of super political action committees, Coinbase has invested approximately $75 million in the 2024 U.S. elections, aiming to oppose candidates who are skeptical of cryptocurrencies, while also establishing grassroots organizations to garner public support for cryptocurrency-related legislation. This super political action committee announced this Wednesday that its funding has now reached $193 million.
If Trump wins the 2024 election, it opens a window for Brian Armstrong to achieve policy breakthroughs that has been waiting for ten years. He praised Trump for ushering in "the dawn of a new era for cryptocurrencies" and attended the "Cryptocurrency Gala" during Trump's inauguration, which featured Snoop Dogg. Now, this executive changes out of his usual T-shirt and black jacket into formal attire to visit Capitol Hill at least every two months.
"In the U.S., Coinbase is at the forefront of all cryptocurrency-related matters," said Anthony Scaramucci, founder of SkyBridge Capital and a long-time cryptocurrency investor.
Last summer, Trump signed the "Genius Act," clearing the way for numerous companies to issue stablecoins, which directly propelled explosive growth in the stablecoin business. The act prohibits stablecoin issuers from paying interest to users, but it does not impose restrictions on exchanges like Coinbase or third-party institutions. The banking industry views this oversight as a legal loophole, which has directly triggered the intense battle surrounding the "Clarity Act."
The Long Legislative Road
The U.S. House of Representatives passed its version of the "Clarity Act" last year, but advancing the bill in the Senate is considered extremely difficult, partly due to disagreements among lawmakers over the regulatory rules that cryptocurrency companies should follow. The Senate Agriculture Committee, responsible for legislation related to the Commodity Futures Trading Commission, passed its version of the bill draft this Thursday. Lawmakers will ultimately need to push a version of the bill through the full Senate and then negotiate with the House to resolve differences between versions.
According to insiders, Brian Moynihan expressed to Brian Armstrong the core viewpoint that if cryptocurrency companies like Coinbase wish to provide deposit-like services, the banking industry generally believes these companies should be subject to the same regulatory constraints as traditional banks. Regulatory agencies such as the U.S. Federal Reserve and the Office of the Comptroller of the Currency conduct strict reviews of banks' risk conditions, regularly inspect their operations, and establish clear rules for the capital requirements of banks' lending and investment activities.
"The controversy surrounding yield rewards is indeed an exception in our relationship with the banking industry. We maintain close cooperation with several banks and have announced multiple collaboration plans," said Coinbase Chief Policy Officer Faryar Shirzad.
Coinbase has established a lucrative partnership with stablecoin issuer Circle, allowing Coinbase to earn substantial revenue shares from the popular stablecoin USDC. Unlike other companies in the cryptocurrency industry, Coinbase pays a 3.5% yield reward to some USDC holders based on this exclusive partnership. The company stated that such incentives help attract users and provide consumers with more options in a time when bank checking account interest rates are extremely low.
"There is no reason to prohibit paying interest to consumers," Brian Armstrong stated in an interview with The Wall Street Journal last year.
Brian Armstrong speaks to the media on Capitol Hill
As the "Clarity Act" is about to enter the voting phase in Congress, the banking industry has begun high-intensity lobbying activities behind the scenes. They cited a government estimate to warn senators that approximately $6.6 trillion in deposits within the traditional financial system could be at risk of being siphoned off by the cryptocurrency market. This lobbying has had a significant effect, as the nearly 300-page bill draft contains several provisions and potential amendments that Brian Armstrong believes are detrimental to the cryptocurrency industry. He subsequently withdrew his support for the bill, and just hours later, Senate Banking Committee Chairman and South Carolina Republican Senator Tim Scott announced the cancellation of the vote.
According to insiders, Brian Armstrong has proposed his own solution to the current impasse. He suggested to Brian Moynihan the establishment of a new category of stablecoin issuers that, if they meet stricter regulatory standards, would be allowed to pay yield rewards to users. This proposal theoretically allows the banking industry and Coinbase to compete fairly in the stablecoin business. Others have also suggested that most yield reward payments could be prohibited, with only a narrow range of exemptions defined for a few companies like Coinbase.
The advancement of any solution relies on Brian Armstrong's support.
"Today, the power of life and death over this bill is believed to be in the hands of Coinbase," said Hilary Allen, a law professor at American University and a securities law expert, who is also a cryptocurrency skeptic. "This is truly shocking."
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