Weekly Roundup 05/29/26 (Was debanking real, SoFiUSD, WSJ gets free banks wrong, trouble in ETHland) (EP.722)

A regulatory prohibition, not individual bank choices, was the core of the debanking controversy. Nick Carter argued the FDIC sent pause letters to banks rolling out crypto products and forced banks with known crypto deposits to keep those deposits below roughly 15 percent of their balance sheet, destroying the business models of Silvergate and Signature Bank in March 2023. Carter noted this is a matter of congressional record with multiple hearings and witnesses, though he acknowledged the full story is not yet known. Matt Walsh added that the SEC scrapping its 50-year-old gag rule, specifically rule 202.5e, which barred defendants from publicly discussing accusations against themselves, will likely prompt affected bank executives to speak publicly for the first time.

Wall Street Journal lead economics commentator Greg Ip compared stablecoins to free banks from the pre-Civil War United States, arguing they pose a risk to the economy. The hosts described the analogy as easily debunkable and noted it has also been made by Paul Krugman, Elizabeth Warren, the BIS, the ECB, the Fed, and Biden treasury officials. Their counter-argument is that the free banking era was not genuinely free banking because US banks were unit banks restricted to single locations and forced to hold state bonds as collateral, making them fragile to local shocks and, in Confederate states, to bonds that went to zero during the Civil War. Canada, which had no central bank until 1935 and allowed branch banking, experienced no bank failures during the Great Depression. Scotland had a decentralized banking system with virtually no failures over roughly 150 years while England, which had a central bank over the same period, experienced repeated banking panics under identical macroeconomic conditions.

The hosts argued stablecoins are not analogous to free banks because they are global and face none of the same geographic or collateral pressures. Under the GENIUS Act, stablecoins are effectively government money funds. A separate Wall Street Journal op-ed falsely claimed GENIUS stablecoins could be collateralized by Bitcoin repo. The hosts noted Michael Barr's speech cited only a theoretical loophole requiring Bitcoin to be considered sovereign money by a foreign country, and that El Salvador had already detenderized Bitcoin at the IMF's behest earlier in 2025, making the claim false even when Barr wrote it. The Reserve Fund, which collapsed in 2008 after holding roughly 700 million dollars in Lehman commercial paper out of 60 billion dollars in total assets, was raised as a comparison point, with total depositor loss of one cent on the dollar. The hosts argued a regulated stablecoin under GENIUS could not experience an equivalent loss because it would require the US government to default.

SoFi launched SoFi USD on Solana and Ethereum, with the stablecoin converting to a tokenized deposit when it hits the SoFi platform. The hosts suggested this hybrid structure is driven by the regulatory interpretation that stablecoins cannot pay interest, and that tokenized deposits are more profitable for SoFi from a credit creation perspective.

David Hoffman of the Bankless podcast, described as the person who coined the phrase ultrasound money for ETH, announced he no longer holds ETH. The hosts argued ETH price appreciation was front-loaded and largely baked in by 2021, and that users of blockchains won through enormous consumer surplus as blockchains raced to the bottom on fees without that benefiting the underlying token. Tron was cited as a blockchain that won on cheapness without benefiting Tron the asset. The hosts also argued Ethereum is inferior for tokenized securities because all transactions are fully public to counterparties, and cited Canton blockchain as having on-chain privacy features and real commercial traction with banks and the DTCC. The DTCC settled 3.7 quadrillion dollars of security transactions in 2024 but is worth approximately 10 billion dollars and captures none of the value it mediates because it lacks a monetary mechanism. The hosts argued blockchain value is largely derived from monetary premium rather than fees, and that Bitcoin is the only blockchain asset that has achieved monetary premium status so far.

Fairshake spent approximately 6.5 million dollars in the Texas 18th congressional district race and unseated Representative Al Green, described as a long-serving crypto antagonist, with pro-crypto candidate Christian Menafee winning the seat. MicroStrategy's Saylor did not buy Bitcoin during the week and instead paid down debt, cited as a likely reason for a Bitcoin price selloff. On May 26th, 107 Bitcoins worth approximately 8.3 million dollars were sent to a burn address across five transfers with no plausible explanation found by Galaxy. A Satoshi-era wallet activated and sent approximately 200 million dollars of Bitcoin to Falcon X and Cumberland. The House Oversight Committee is investigating insider trading on Polymarket and Kalshi, and Google staff security engineer Michelle Spagnuolo was arrested for using material non-public information to insider trade on Polymarket by betting on Google's top searches of the year.