Major US Banks Explore Crypto with Coinbase Amid Regulatory Friction

The financial landscape is rapidly evolving as major US banks venture into the realm of cryptocurrency. Coinbase CEO Brian Armstrong has revealed early-stage pilot partnerships involving stablecoins, crypto custody, and digital-asset trading.

Coinbase's Collaboration with Major Banks

Armstrong indicated that these banks are already conducting trials with Coinbase, though he refrained from naming specific institutions. He warned that banks slow to embrace crypto "are going to get left behind." These remarks were made during a joint appearance with BlackRock CEO Larry Fink at The New York Times DealBook Summit.

BlackRock's Bitcoin Perspective

Despite past disagreements between Armstrong and Fink on crypto, the two struck a notably similar tone on Bitcoin. Armstrong dismissed the idea that Bitcoin could ever fall to zero, while Fink stated that he now sees a significant "use case" for the asset, though he cautioned that Bitcoin is "still heavily influenced by leveraged players." BlackRock’s iShares Bitcoin Trust (IBIT), launched in January 2024, is now the largest spot Bitcoin ETF with a market cap of over $72 billion, according to CoinMarketCap data. BlackRock also issues the largest tokenized US Treasury product by market cap, currently managing around $2.3 billion in assets, according to data from RWA.xyz.

Banks vs. Coinbase: A Growing Divide

Despite Brian Armstrong’s statements regarding collaboration between Coinbase and some major banks, the relationship has become increasingly adversarial in recent months. In August, the Banking Policy Institute, a lobbying group chaired by JPMorgan’s Jamie Dimon, warned Congress that stablecoins could undermine the banking sector's credit model. The group urged lawmakers to tighten the GENIUS Act, arguing that a capital shift from fiat deposits into stablecoins could increase lending costs and reduce credit available to businesses. Traditional banks are primarily concerned about what they perceive as a "loophole" in the US GENIUS Act, which bans stablecoin issuers from offering yield but allows third parties, such as Coinbase, to do so. In September, Armstrong told Fox Business that Coinbase aims to replace traditional banks by becoming a “super app,” offering everything from credit cards to payments and rewards. He also criticized the traditional banking system as outdated, pointing to the “three percent” fees charged every time people use a credit card. Banks have also directly pushed back against Coinbase. In November, the Independent Community Bankers of America urged the Office of the Comptroller of the Currency to reject the exchange’s application for a national trust charter, arguing that Coinbase’s crypto-custody model is untested. Paul Grewal, the chief legal officer at Coinbase, responded on X: “It’s another case of bank lobbyists trying to dig regulatory moats to protect their own. From undoing a law to go after rewards to blocking charters, protectionism isn’t consumer protection.”