Q&A: Why the ICBA is taking a more aggressive stance on crypto

WASHINGTON — Crypto interests are having a heyday in Washington, with Congress passing rules to govern the industry at breakneck speed and regulators welcoming their entry into the broader banking system. 

But community bankers want to make it known that crypto's moment has come at a price. Senate Republicans refused to even vote on banks' favored changes to a stablecoin yield provision in the fast-moving crypto market structure legislation, the CLARITY Act, during the bill's markup last month. Regulators, for their part, are handing out a number of charters to nontraditional financial companies, which bank groups say amounts to those companies taking on traditional banking activities with much weaker oversight. 

Independent Community Bankers of America, the leading trade group for community banks in D.C., says it's launching a public push for "guardrails" on the crypto system, arguing that failing to do so will imperil local communities that rely on small bank lending.

While bank groups have commented and lobbied the Hill and regulators on these issues, the plan to launch what ICBA described as a six-figure campaign for the first month as a marked acceleration of how the banking industry is communicating their concerns with the wider public, and a step up in how aggressively they're fighting for their changes. 

American Banker sat down with ICBA CEO Rebeca Romero Rainey to talk about the group's new campaign, why they're launching it now, and how the banking industry is thinking about advancing its aims in Washington. 

The following conversation has been edited for length and clarity. 

American Banker: Tell me more about why you're launching this campaign? What is it, and why now? 

Rebecca Romero Rainey: What we are launching here is a campaign intended to protect Main Street communities, and when you ask 'why now,' I think it really is the confluence of everything happening so quickly right now. 

Obviously, the CLARITY Act in its potentially final stages here, and then there's all the rules that we're now commenting on: the Fed master, or Fed payment account and the OCC national trust charters.  I mean, everything is sort of coming to a head, and at the end of the day, from our perspective, we look at community banks as the backbone of Main Street. All that we see happening here in what the data show us is the strong potential for deposits to be displaced from local communities. The campaign is designed to ask that going to benefit and what intended to really continue to define the impact to Main Street communities.

AB: Is there any talk, especially after the last election and seeing how much money the crypto industry spent, in getting more involved in that as a route? Do you think banks need to get involved in that game more? 

Romero Rainey: For me, it's more about asking the question, 'Why is this all moving so quickly?' The inference here, obviously, is there's a lot at stake when you think about the campaign dollars that are at play. Most of our campaign is focused on highlighting some of those differentials, but to your point, down the road that could be a component of it. But right now, we're focusing on the incredible pace of what's happening right now. 

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AB: The White House put out a report that it claims refutes the banking industry's concerns about stablecoin yield, and crypto's threat to deposits in the banking system. Did you want a chance to talk about your perspective on this, and to address that? 

Romero Raniey: If crypto companies are allowed to offer interest rewards and yield on stablecoins, that is essentially creating a deposit-taking function, especially with stablecoins' transaction nature, which is very different from what we've ever seen in the past. So we know today when we draw from Treasury data, when you draw those two components together, this could result in a loss of 1.3 trillion in deposits, that leads to a decline in $850 billion in local lending. If these deposits that are going into stablecoins aren't coming from the banking system, where are they coming from? It's not like new dollars are being created here, so it's going to come from somewhere. There may be some argument in terms of amount, but going to what should be some neutral studies here, that will create impact. That for us is a reason to say let's pause for a minute. 

AB: It's struck me how Senate Banking Committee Chairman Tim Scott, R-S.C., recently refused point blank at a public markup a chance for lawmakers to vote on changes you all support to the CLARITY Act. I can't imagine that happening just a couple of years ago from a Republican, and at the same time, Democratic House lawmakers seem more open to things like tailoring bills. 

Does this impression line up with your experience, and does that change anything about the ways you pursue your goals in Washington? 

Romero Rainey: We've brought to the table some very valid and legitimate concerns that that has maybe potentially slowed some of the progress, so that's frustrating some individuals. But we're standing up for what we believe in, and that's access to credit in Main Street America, and so, to your point, I think that's the 'Why' behind this campaign. 

On engagement moving forward, I don't know. But given the significance and the weight and the impact of all of this, it just seems inherent that we need to continue to push on this and make sure folks understand what is at stake.

AB: We do have midterms coming up, and we're not expecting a clean Republican trifecta in Washington next year. That probably means Congress returns largely to a standstill. Does that mean you can take your foot off the gas on this? 

Romero Rainey: No. To me, this isn't a red or a blue issue. Look at the number of OCC National Trust Charters that have been granted, and now the access to master accounts. That's what I think is so concerning and so interesting about this dynamic: It's not just one piece of legislation, it really is about the broader impact to the financial system as a whole. 

AB: ICBA represents a wide swath of banks from different parts of the country, some with very different business models. Was it a struggle to get your members to agree on this stance? 

Romero Rainey: I would say there is a broad consensus on this topic — and you know what? It's one of the things I love about the community banking system. It's incredibly diverse, because it's a reflection of the communities that we're serving, and unique business models that are thriving within their focus of community. The common denominator amongst all of them, though, is that they're essentially playing by the same rules of the road.