TradFi Revolution! White House Crypto Tsar: Banks and the crypto industry will merge into a single sector

White House crypto czar Sacks stated at Davos that after the passage of the Market Structure Bill, TradFi banks and crypto companies will merge into “a single digital asset industry.” However, the battle over stablecoin yields has become the main obstacle to the CLARITY bill, leading the largest compliant US crypto exchange to withdraw support, citing that the draft favors banks.

Sacks Davos predicts: TradFi and crypto moving toward integration

(Source: CNBC)

David Sacks made a major prediction about the future of TradFi during an interview with CNBC’s Squawk Box at the World Economic Forum in Davos, Switzerland, on Wednesday. When asked about negotiations regarding the proposed CLARITY bill, Sacks clearly stated that passing this Market Structure Bill would fundamentally change the landscape of the financial industry.

Sacks said, “After the bill passes, banks will fully enter the cryptocurrency industry. At that point, TradFi banks and cryptocurrencies will no longer be two separate industries, but one unified digital asset industry. Over time, banks will be willing to pay yields because they will be involved in stablecoin businesses.”

This prediction is significant. For a long time, traditional financial institutions and crypto companies have been in competition or even opposition. Traditional banks worry that cryptocurrencies will steal deposits, while crypto firms criticize banks for hindering innovation. Sacks’ statement indicates that the White House believes this divide will soon end, and the two industries will be integrated under regulatory frameworks.

This integration is not voluntary but an inevitable result of evolving regulation. Once the CLARITY bill becomes law, a clear regulatory framework will enable TradFi banks to legally enter the crypto space, while also forcing crypto companies to accept stricter standards. Under this scenario, the boundaries between the two will blur, ultimately merging into a single, regulated digital asset industry.

Sacks cites the GENIUS Act as an example, noting that it failed multiple times before becoming law, implying that although the CLARITY bill is currently deadlocked, it may eventually pass. The success of the GENIUS Act (effective July 2025) demonstrates that even with significant resistance, legislative progress is possible if all parties are willing to compromise.

Battle over stablecoin yields: core conflict between TradFi and crypto

Sacks pointed out that the yield competition has become the main obstacle to advancing the legislation. The core issue is: should stablecoin issuers be allowed to pay yields to holders? This seemingly technical question actually concerns the distribution of survival space between TradFi banks and crypto companies.

TradFi banks believe that allowing stablecoins to offer high yields could lead to trillions of dollars in deposits flowing out of traditional bank accounts. Currently, US bank savings account interest rates generally range from 0.5% to 2%, while some crypto platforms offer stablecoin yields of 5% to 8%. If stablecoins can legally offer high yields, it could cause massive withdrawals from low-interest savings accounts, posing a severe threat to the traditional banking system.

Crypto companies argue that yields are a core competitive advantage of stablecoins. Banning stablecoin yields would be equivalent to stripping crypto firms of their competitive edge against TradFi banks, giving banks an unfair advantage when entering the crypto space. Such asymmetric regulation would stifle crypto innovation and allow TradFi banks to monopolize the digital asset industry.

Although the US GENIUS Act prohibits token issuers from offering stablecoin yields, third parties like Coinbase can still legally provide rewards. This compromise attempts to balance TradFi banks’ concerns with crypto companies’ needs but clearly does not fully resolve the conflict.

Sacks urges the crypto industry to “see the bigger picture,” saying he understands that “yields are very important to them in principle, but drafting an overall market structure bill is equally important.” This statement hints that the White House hopes crypto firms will make concessions on yield issues in exchange for greater regulatory certainty. Sacks also pointed out that banks should recognize that yields are already a feature of this legislation, implying that TradFi banks also need to compromise.

Positions of both sides in the stablecoin yield dispute

TradFi banks’ concern: High-yield stablecoins could cause trillions of dollars in deposits to flow out, impacting the traditional banking system

Crypto companies’ demand: Yields are a core competitive advantage; banning them would kill innovation and give banks an unfair advantage

White House stance: Both sides need to compromise; crypto firms should accept some restrictions for regulatory certainty

Coinbase withdraws support, sparking legislative crisis

The debate between traditional TradFi banks and crypto companies over whether stablecoins should be allowed to pay yields has lasted months, but last week Coinbase publicly withdrew support for the CLARITY bill, intensifying the dispute. Coinbase CEO Brian Armstrong stated on X that the current draft has “too many issues,” including removing stablecoin yields and protecting banks from competition, making it impossible to support the bill.

Armstrong’s statement reflects strong dissatisfaction within the crypto industry. As the largest compliant US crypto exchange, Coinbase’s position is a bellwether. Its withdrawal of support signals that the conflict between crypto and TradFi banks has escalated to an irreconcilable level. Armstrong believes the current draft favors TradFi banks’ interests at the expense of crypto innovation.

On Tuesday, Armstrong told CNBC’s Squawk Box that since the bill is stalled in the Senate, “we have an opportunity to come back and talk with TradFi CEOs to see what can create a win-win.” This indicates Coinbase has not entirely given up on supporting the bill but hopes to negotiate better terms.

However, prospects for negotiations are bleak. TradFi banks wield strong lobbying power in Congress, and although the crypto industry gained unprecedented support during the Trump administration, its influence in legislation remains weaker than that of traditional finance. Coinbase’s withdrawal may cause the CLARITY bill to remain stalled in the Senate for a long time or even die.

Sacks does not seem worried about this. His Davos remarks suggest the White House believes all parties will ultimately reach a compromise. Sacks pointed out that lawmakers, TradFi banks, and crypto companies must compromise for the Market Structure Bill to be submitted to President Trump for signing. This optimistic outlook is based on the assumption that all parties have enough motivation to pass legislation—without a clear regulatory framework, TradFi cannot scale into crypto, and crypto cannot achieve full legitimacy.

Long-term impacts and challenges of TradFi transformation

Sacks predicts that the integration of TradFi and crypto into “a digital asset industry” will have profound effects on the entire financial system if realized. First, it would fundamentally change the crypto market structure. Currently, the crypto market is mainly dominated by specialized exchanges and DeFi protocols, but full entry by TradFi banks would bring traditional risk management, compliance standards, and customer bases.

For retail investors, this fusion presents both opportunities and challenges. Opportunities include safer, more convenient crypto services provided by TradFi banks, lowering participation barriers. Challenges involve overregulation potentially stifling the decentralization and innovation of crypto, turning it into a digital version of traditional finance.

For native crypto companies, competition with TradFi banks will intensify. Banks have brand power, capital, and customer advantages, while crypto firms’ technological and innovative strengths may be weakened under strict regulation. Only those that can balance compliance and innovation will survive in the merged digital asset industry.

From a macro perspective, this integration aligns with the long-term trend of fintech development. Blockchain, smart contracts, and digital assets are not meant to replace traditional finance but to merge with it, creating a more efficient and transparent financial system. Sacks’ prediction reflects this policy direction.