The interest rate cut storm has not subsided, and the stablecoin war has reignited: The conflict between Trump and the Federal Reserve may escalate

According to the Zhitong Finance APP, stablecoins pegged to the US dollar may trigger another showdown between the Federal Reserve and US President Donald Trump. Cryptocurrency companies like Circle (CRCL.US) and Ripple are seeking to bypass traditional lending institutions by applying for banking licenses, but their larger goal may be to establish what is known as a master account with the Federal Reserve.

Since Trump began his second term, he has launched several initiatives to support cryptocurrencies. Last week, the US House of Representatives passed the GENIUS Act, which outlines the regulatory framework for digital dollar issuers. Companies like Circle and Ripple must back their tokens with high-quality liquid assets and publicly disclose their reserve status. The act aims to enhance businesses' confidence in accepting stablecoins as a mainstream payment method.

Like most fintech startups, cryptocurrency companies currently face numerous operational restrictions. As a result, fintech firms often collaborate with regulated banks to conduct business, a model commonly referred to in the industry as "renting a license." According to research by Oliver Wyman, this model reduces customer acquisition costs for banks by 82.5% to 95%, but it also makes it difficult for fintech companies to break free from their reliance on banks.

The GENIUS Act allows stablecoin issuers to act as custodians of their tokens, provided they accept oversight from federal regulatory agencies. This is one of the reasons why crypto companies are applying to become banks with the Office of the Comptroller of the Currency (OCC). In addition to saving on custody fees, a banking license also allows them to offer services such as settlement transactions.

For cryptocurrency companies, the larger goal is to qualify for establishing what is known as a "master account" with the Federal Reserve. Such accounts would enable companies to quickly transfer large sums of money through the Fedwire payment system without incurring fees to other banks.

However, the Federal Reserve is cautious when approving such applications. It classifies applicants based on whether they are insured by the Federal Deposit Insurance Corporation (FDIC). Stablecoin issuers and crypto companies are placed in a lower tier. According to data from Jason Mikula, author of Fintech Business Weekly, the Federal Reserve has approved 86% of applications from FDIC-insured companies, but since 2022, only 1 out of 39 lower-tier companies has been approved. The crypto industry is once again fighting back. Custodia, based in Wyoming, has filed an appeal after its application for an account was denied.

The conflict between Trump and Federal Reserve Chairman Jerome Powell has a long history. Trump has repeatedly criticized Powell, complaining about high interest rates. Newly appointed Vice Chair for Supervision Michelle Bowman may be more inclined to relax some regulatory requirements. Even so, the wave of applications from cryptocurrency companies will test the Federal Reserve's willingness to adapt to the cryptocurrency trend