U.S. banks aren’t cowed by their president’s stablecoin threats, the Treasury Department now thinks coin mixers aren’t entirely evil, and some crypto crooks are better than others at avoiding justice.
There’s still no word on when the Senate Banking Committee might resume public discussion of its CLARITY Act, the digital asset market structure bill that has been in a holding pattern ever since mid-January. That was when the Coinbase (NASDAQ: COIN) exchange abruptly withdrew its support due to language that would have limited its ability to pay ‘rewards’ to customers for holding stablecoins on its platform.
(So you know: the banking sector opposes crypto platforms offering these rewards and is lobbying hard to include language in CLARITY prohibiting it, much as stablecoin issuers are prohibited from offering ‘yield’ to their customers via the GENIUS Act. The banks say their customers will withdraw deposits in pursuit of higher returns. The crypto platforms say if the banks want to keep those customers, they should have to compete for them.)
This ‘yield v reward’ fight is considered the prime obstacle blocking CLARITY’s progress, and last week saw President Donald Trump publicly blame the banks for the holdup. Trump’s intervention came just moments after he met with Coinbase CEO Brian Armstrong, who was supposed to be in the White House’s doghouse due to his perceived hissy-fit in January. But who knows what persuasive arguments—verbal or otherwise—Armstrong made during his Trump meeting?
Trump may have expected the banks to knuckle under, but so far they haven’t shown a willingness to hoist the white flag. Three days after Trump’s Truth Social post, White House crypto advisor Patrick Witt tweeted his confusion over the banks’ unwillingness to bend, pointing out that the status quo “means no restrictions on intermediaries offering stablecoin rewards. If you believe the banks’ argument about deposit flight, this would be catastrophic.”
Crypto in America reported Monday that Banking member Thom Tillis (R-NC) could prove the difference in this squabble. Tillis takes the ‘deposit flight’ argument seriously and is reportedly mulling whether to summon banking and crypto representatives to his office so they can make their arguments in person (and possibly knife-fight for his amusement).
Republicans have two more members on the committee than Democrats, but if Tillis—a sharp Trump critic since he announced plans to retire at the end of his current term—was to side with all Dems in opposing CLARITY’s passage, the result would be a stalemate.
While not all Dems are vehemently opposed to CLARITY, the stablecoin fight has (for the moment) sidelined their other concerns regarding the bill. Among these is the ‘ethics’ issue, aka the Dems’ desire to include language that restricts elected officials from profiting off crypto ventures while simultaneously eliminating regulatory guardrails that could limit the profitability of those ventures.
Trump’s family has a long list of lucrative crypto ventures, many of them highly controversial, including their own stablecoin and a platform that wants a bank license to boost adoption of said stablecoin. To date, Trump has fiercely resisted any language that would limit his family’s crypto operations, and that stance isn’t likely to change.
Another CLARITY obstacle is whether decentralized finance (DeFi) developers should be held legally liable if the platforms they build are used for criminal purposes. The Senate Judiciary Committee recently complained that Banking is infringing on their jurisdictional turf, adding even more complexity to this argument.
Trump injected a new wrinkle into CLARITY’s journey this weekend by declaring that he will refuse to sign any bill into law until the Senate approves the Safeguard American Voter Eligibility (SAVE) Act. On Monday, Trump said SAVE, which would require individuals to present specific proofs of citizenship when registering to vote, would “guarantee the midterms.” But passing it will require the votes of at least seven Senate Dems—barring some major rule changes—which is anything but guaranteed.
And lurking just over the horizon are those November midterms and an early end to the current Congress, so candidates seeking re-election can hit the campaign trail. With numerous other pieces of contentious legislation also requiring passage, there’s a very real possibility that CLARITY could get lost in the shuffle if it fails to shake off its cobwebs ASAP.
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BPI v OCC
The banking sector has other reasons to be annoyed with the Trump administration. Last week’s decision by the Federal Reserve to grant the Kraken exchange ‘limited’ access to the Fed’s master account system drew immediate opposition from the Bank Policy Institute (BPI). The BPI said the Fed had given its approval despite having yet to finalize its policy framework for these so-called ‘payment accounts.’
On Monday, The Guardian reported that the BPI is “considering suing” the Treasury Department’s Office of the Comptroller of the Currency (OCC) over its recent decisions to issue a flurry of new national trust bank charters to crypto platforms and other fintechs. The BPI previously protested against the charter applications by crypto firms, to no avail.
While the BPI has yet to comment on the report, in its March 7 ‘insights’ update, the BPI noted similar criticisms of the OCC’s actions by Brandon Milhorn, CEO of the Conference of State Bank Supervisors (CSBS). Milhorn offered his criticism in remarks to the Carolina Bank Directors Forum in Charlotte, North Carolina on March 3.
Describing various authorities granted to the OCC by Congress, Milhorn said: “The OCC seems to think that they can take bits and pieces of all these authorities and cobble them together in any number of ‘Franken-charters’ … but that is inconsistent with the history of the National Bank Act and the OCC’s specific, limited chartering authority.”
Referencing the OCC’s proposed rules for implementing the GENIUS Act, Milhorn said the OCC appears “to reserve to itself unfettered discretion to allow trust banks that are also payment stablecoin issuers to engage in activities beyond those specifically delineated in the GENIUS Act.”
Noting the 18 digital asset trust bank applications filed (so far) with the OCC, Milhorn asked: “When will we know what activities the OCC has authorized? Only when the OCC approves a charter? Given the opaque nature of the publicly available portion of charter applications and the vague nature of OCC approvals, maybe not even then. So much for transparency, accountability, and the rule of law.”
Milhorn urged CSBS members to “work together to tackle these challenges,” suggesting that “litigation is certainly a possibility … to ensure that the OCC does not overstep its authority.”
Milhorn’s statements echo views the CSBS expressed last month in a letter to the OCC, which included the warning that “Congress did not give the OCC open-ended, ‘choose your own adventure’ chartering authority.” The letter singled out any institution “that neither receives deposits nor maintains FDIC insurance,” which describes the crypto firms seeking the charters.
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Treasury: Coin mixers no longer just for criminals
The Treasury Department filed its own GENIUS implementation proposal last week that focused on ‘innovative technologies to counter illicit finance involving digital assets.’ The report follows Treasury’s post-GENIUS request for comment from the public. It includes a discussion of “the extent to which distributed ledgers, mixers, tumblers, and similar services mix payment stablecoins to obfuscate illicit activity.”
To the surprise of many, the report cites rationales by which “lawful users of digital assets may leverage mixers to enable financial privacy.” These include a desire to “protect sensitive information on personal wealth, business payments, or charitable donations from appearing on a public blockchain.”
Storm is appealing the verdict, although he might first secure a pardon from Trump, who last December said he’d “look at” the possibility of pardoning a different mixing founder. (That would be Samourai Wallet’s Keonne Rodriguez, who’s currently serving five years after pleading guilty to the same kind of charge for which Storm was convicted.)
Treasury’s report does acknowledge that criminals utilize coin mixing platforms to obfuscate the trail of tokens that are the proceeds of crime, including tokens stolen from others, as in the case of North Korea’s $1.5 billion hack of the Bybit exchange in February 2025.
But while Treasury admits that stablecoins are “often used as one element of a complex laundering process that includes the use of mixers,” the report claims “the depositing of stablecoins directly into mixers for illicit purposes appears to be low, although illicit actors may apply other obfuscation techniques to stablecoins.”
The report’s DeFi section notes that GENIUS directed Treasury to suggest how to apply the term ‘digital asset service provider’ to DeFi platforms. The report basically passes the buck back to Congress, saying it “should consider codifying language explicitly setting out which actors, if any, in the DeFi ecosystem may be subject to AML/CFT [anti-money laundering and combating the financing of terrorism] obligations, taking into consideration those actors’ roles in the ecosystem and attendant risks.”
As part of this approach, Treasury suggests that Congress “consider enacting a digital asset-specific ‘hold law’ that offers a safe harbor to institutions that temporarily and voluntarily hold digital assets involved in suspected illegal activity during a short-duration investigation. Such a law should consider transparency when an asset is frozen and consumer protection measures. Such a law would be particularly useful for countering illicit finance involving permitted payment stablecoins.”
Treasury says it will continue to monitor how blockchain analytics tools could help achieve its AML/CFT aims. Treasury is also exploring public-private partnerships on how AI tools might “help streamline the detection of illicit patterns,” although it acknowledges that implementing AI technology comes with its own challenges.
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Crime doesn’t pay
On March 5, FBI Director Kash Patel tweeted about the arrest of John Daghita for his role in the theft of over $46 million in digital assets from the United States Marshals Service (USMS). That theft, and Daghita’s role in it, was exposed in January by blockchain sleuth ZachXBT.
Daghita, who goes by the name ‘Lick’ online, is the son of Dean Daghita, owner of Command Services & Support (CMDSS), a contractor hired by the USMS in 2024 to custody some of the tokens it’s seized from criminals over the years. The younger Daghita’s role in the theft was revealed after he got into a juvenile war of words with another online personality over who had more assets in their digital wallets.
Patel’s tweet showed Lick doing a perp walk in handcuffs, alongside a photo of cash, hardware wallets, and other gear. Lick was arrested on the Caribbean island of Saint Martin with the help of the FBI’s international partners in the region.
Patel’s tweet referred to Lick as “a U.S. government contractor,” appearing to suggest that the younger Daghita may have been performing a similar service as his father. If so, it’s unclear whether Lick might have been doing so via his father’s firm or his own company.
In response to Patel’s tweet, ZachXBT couldn’t resist tweeting how Lick had “taunted me multiple times via his Telegram channel” after being exposed publicly, adding “Thanks for the last laugh, John.”
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Actually, crime does pay
The same day Lick’s arrest was announced, TRON founder Justin Sun tweeted his pleasure at being able to “confirm that the SEC [Securities and Exchange Commission] has moved to dismiss all claims against me, TRON Foundation, and BitTorrent Foundation.”
Sun’s tweet came after SEC attorneys informed the U.S. District Court for the Southern District of New York that the agency had “reached a settlement” with Sun and the companies originally named in the market manipulation suit the SEC’s previous management filed against Sun et al in March 2023.
That suit involved what many legal observers believe was pretty solid evidence of wash trading of both the Tron network’s native token TRX and BTT, a token issued by the BitTorrent network and developed by the Sun-controlled Rainberry (formerly BitTorrent Inc).
On March 9, U.S. District Judge Edgardo Ramos approved the resolution, under which Rainberry will pay a civil penalty of $10 million in exchange for all charges against Sun, Tron, and BitTorrent being dropped. Sun was spared from having to admit or deny any of the allegations made in the original complaint.
All but two of the social media influencers who were named as taking money from Sun et al to promote TRX/BTT had already reached settlements with the SEC when it filed the complaint. On Monday, the SEC dropped its charges against DeAndre Cortez Way, aka ‘Soulja Boy,’ who never responded to the original complaint.
The SEC ‘paused’ the suit in February 2025, one month after Trump was sworn in as president for the second time. That pause came after Sun gave tens of millions of dollars to Trump’s various crypto projects, including purchasing $75 million worth of WLFI, the governance token of Trump’s World Liberty Financial (WLF) project.
Sen. Elizabeth Warren (D-MA), a frequent crypto critic, Banking Committee member and one of the loudest voices pushing for ‘ethics’ language in the CLARITY Act, issued a statement following the SEC’s announcement of its deal with Sun.
“Last month, SEC Chair [Paul] Atkins denied in front of Congress that the Trump Administration is giving a free pass to crypto billionaires with ties to Donald Trump. Justin Sun poured $90 million into Trump’s crypto ventures, and today the SEC agreed to drop its case against him. The SEC should not be a lap dog for Trump’s billionaire buddies, and any crypto legislation moving through Congress must stop the President’s crypto corruption.”
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Watch | Tokenization on Public Blockchain: Transforming RWAs and Finance
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Source: https://coingeek.com/us-banks-not-ready-to-cave-after-trump-stablecoin-threats/
