$193 million political donations! Crypto giants attempt to "hijack" the US midterm elections

Fairshake PAC has raised $193 million, just 10 months before the US midterm elections. The White House convened banking and crypto executives on Monday to address the CLARITY bill and stablecoin yield disputes. Standard Chartered warned that stablecoins could drain $500 billion in deposits from banks. Fairshake’s support for candidates in 2024 has a winning rate of over 80%.

$193 Million War Chest Pushes White House to Act

With only ten months remaining until the US midterm elections, the cryptocurrency industry has accumulated $193 million in political influence. The White House is now busy trying to revive a stalled digital asset bill. With such substantial funds on the table, the Trump administration has effectively been summoned to the negotiation table.

Crypto political action committee Fairshake announced on Tuesday that by the end of 2025, its funds will reach $193 million, nearly matching the $195 million spent during the entire 2024 election cycle. The money has already been secured, even before campaign activities have begun. This “war chest pre-stocked before the battle begins” has made Fairshake one of the most influential political action committees for the 2026 US midterm elections.

Last year, Ripple donated $25 million, venture capital firm a16z contributed $24 million, and Coinbase donated $25 million in the first half of this year. A Fairshake spokesperson stated that the PAC will continue supporting pro-cryptocurrency candidates and oppose legislation hostile to the industry. This “reward friends, punish enemies” strategy has yielded significant results in 2024.

Fairshake’s investments in 2024 have paid off handsomely. The supported candidates won with overwhelming margins, with a success rate exceeding 80%. Congress passed legislation related to stablecoins (the GENIUS bill), and industry-friendly regulators were appointed to the SEC and other key agencies. Former SEC Chair Gary Gensler resigned, and his successor, Paul Atkins, is openly a crypto supporter. These achievements demonstrate the effectiveness of political donations.

The issue is: despite this financial arsenal putting pressure on Washington, the most important legislation for the industry remains deadlocked. The CLARITY bill, a comprehensive law on digital asset market structure, was withdrawn from a Senate Banking Committee vote earlier this month due to conflicts between crypto firms and traditional banks over stablecoin yield terms. Now, the White House is directly involved, with President Trump’s crypto policy committee convening senior executives from both sides on Monday to seek a compromise. The Blockchain Association, Digital Chamber of Commerce, and Crypto Innovation Committee have all confirmed their participation.

The Brutal Math of the $500 Billion Deposit Battle

Bank opposition to stablecoins is not just show; it’s a matter of survival. Jeff Kendrick, head of global digital assets research at Standard Chartered, issued a stark warning this week, estimating that US bank deposits could shrink to about one-third of the total stablecoin market cap. If the stablecoin market grows to $2 trillion, deposits at developed-market banks could decrease by approximately $500 billion by the end of 2028. Emerging-market banks could face even greater losses, with deposits potentially dropping by up to $1 trillion during the same period.

The math is simple but brutal. Currently, the market cap of dollar-pegged stablecoins is about $301 billion, meaning hundreds of billions of dollars have already flowed out of traditional banking systems. Unlike bank runs triggered by crises, this capital outflow is structural—slow and steady. Bank CEO Brian Moynihan warned a few days ago that as much as $6 trillion (roughly 30-35% of US commercial bank deposits) could eventually shift into stablecoins.

A key detail intensifies this threat: stablecoin reserves are not circulating back into the banking system. Kendrick estimates that Tether holds only 0.02% of its reserves in banks, while Circle holds about 14.5%. The rest are invested in Treasury securities and other non-bank financial instruments. Funds flowing from banks to stablecoins are unlikely to re-enter the market circulation, meaning banks not only lose deposits but also cannot offset losses through reserves held at stablecoin issuers.

Triple Impact of Stablecoins on the Banking System

Deposit Losses: $500 billion (developed markets) + $1 trillion (emerging markets) = $1.5 trillion total loss

Reserves Not Returning: Tether only 0.02% in banks, Circle only 14.5%, the rest invested in government bonds and other non-bank assets

Interest Rate Competition Fails: Bank savings rates 0.5%-1%, stablecoin yields up to 4%-5%, users vote with their feet

Regional banks face the greatest risk. Standard Chartered specifically pointed out that Huntington Bank, M&T Bank, Truist Financial, and CFG Bank are particularly vulnerable because they rely heavily on net interest margin financing. These small and medium-sized banks cannot diversify income streams through investment banking or wealth management like JPMorgan or Bank of America. If deposits rapidly decline, they could face liquidity crises or even collapse.

Monday Negotiations Will Decide the Fate of CLARITY

The core issue in this debate is simple: should stablecoin issuers or crypto exchanges be allowed to pay interest on dollar-pegged tokens? Last year’s GENIUS bill prohibited issuers from paying interest directly, but banks argue that the bill leaves a loophole allowing third-party platforms like exchanges to offer yields, creating new competition for deposits.

Crypto companies counter that stablecoins can generate yields through reserves and market activities. They argue that restricting reward mechanisms unfairly protects existing firms and stifles innovation. Coinbase has publicly opposed these restrictions, believing they will limit innovation and institutional adoption. CEO Armstrong even withdrew support for the CLARITY bill on January 14, stating, “I’d rather have no bill than a bad bill.”

Monday’s White House meeting will determine the fate of the CLARITY bill. Possible compromises include: setting caps on third-party yields (e.g., not exceeding Treasury yield + 1%), requiring exchanges offering yields to hold higher capital reserves (similar to bank capital adequacy requirements), or establishing a transition period allowing existing businesses to adjust gradually. All these proposals aim to balance “protecting banks” and “allowing innovation.”

However, reaching a compromise will not be easy. Banks want to ban third-party yields outright, while crypto firms insist this is an unfair competitive restriction. The two sides are far apart, and whether the White House can mediate successfully remains uncertain. If negotiations break down, the CLARITY bill may fail to pass before the midterm elections, severely damaging Trump’s promise to be the “first crypto president.”

The White House’s direct involvement shows how urgently the Trump administration wants this bill to pass. Trump has previously embraced cryptocurrencies during his campaign, and now he faces pressure to deliver on that promise. Industry insiders praise the White House for facilitating negotiations, but from another perspective, it also reveals that this administration is being pulled into the industry’s influence. $193 million is not just a number; it’s a form of influence—a force compelling top officials to seriously consider industry demands.