Coinbase and Paradigm Say Banks Are Trying to Block Stablecoin Innovation

Leaders of Coinbase and Paradigm have accused powerful US banking groups of employing “protectionist” policies to block innovation in crypto and stablecoins. This clash highlights the deepening division between traditional finance (TradFi) and digital asset firms, both vying for regulatory clarity in a rapidly evolving financial landscape.

Coinbase’s Chief Legal Officer, Paul Grewal, openly criticized the Independent Community Bankers of America (ICBA) for urging the Office of the Comptroller of the Currency (OCC) to reject Coinbase’s trust bank charter application. Grewal stated on X:

"Imagine opposing a regulated trust charter because you prefer crypto to stay unregulated. That’s ICBA’s position… another case of bank lobbyists trying to dig regulatory moats to protect their own."

The ICBA argued that Coinbase’s application fails to meet the statutory chartering standards and could set a dangerous precedent for the US banking system.

Independent Community Bankers of America (ICBA) called on the OCC to deny Coinbase’s application for a national trust bank charter for its subsidiary, Coinbase National Trust Co. The ICBA contended that the application not only fails to meet legal requirements but could also lead to broader risks for the structure of the US financial sector:

"If stablecoins become more integrated into the traditional financial system without full safeguards, crypto market shocks could infect the broader economy for the first time."

Coinbase’s Chief Policy Officer, Faryar Shirzad, highlighted the broader debate over stablecoins, emphasizing their transformative potential for payments. Shirzad pointed to the GENIUS Act, which seeks to regulate dollar-backed stablecoins under the OCC’s oversight. He stated:

"Stablecoins are a breakthrough in payments technology… faster, cheaper, and safer. The GENIUS Act gives us clear rules: 1:1 backing, par redemption, and 24/7 supervision."

Shirzad also argued that while some Bank Policy Institute (BPI) member banks are already using stablecoins, efforts to protect outdated payment systems are doomed to fail.

Alexander Grieve, Vice President of Government Affairs at Paradigm, accused the Bank Policy Institute (BPI) of employing “bad-faith” tactics to undermine stablecoins. He stated:

"The BPI seems to have taken the ‘if you can’t beat them, destroy them’ approach."

Grieve likened stablecoins to technological breakthroughs such as ETFs and Velcro, arguing that innovation often exceeds its initial purpose. He further suggested that anti-crypto sentiment within the BPI may stem from antiquated political agendas and alleged influence from Gary Gensler’s allies at the SEC.

The Bank Policy Institute (BPI) released a report warning about the risks of integrating stablecoins into traditional finance without adequate safeguards. They argued that this could allow crypto market shocks to spill over into the broader economy. Additionally, BPI highlighted gaps in illicit finance risk management, emphasizing the need for clear regulatory frameworks.

The decision by the OCC on Coinbase’s national trust bank charter will demonstrate how far regulators are willing to go in incorporating crypto firms into the banking system. Meanwhile, the GENIUS Act could serve as a pivotal framework for regulating stablecoins if approved by Congress.

As digital payments and tokenized assets continue to expand, the power struggle between crypto innovators and traditional banks is poised to shape the future of US financial regulation.