Brian Armstrong, CEO of the biggest U.S. crypto company, was having coffee with former U.K. prime minister Tony Blair at the World Economic Forum in Davos last week when JPMorgan Chase's Jamie Dimon cut in.

"You are full of s -- ," said Dimon, a longtime crypto skeptic who previously called bitcoin a fraud, his index finger pointed squarely at Armstrong's face.

Dimon, in a nutshell, told him to stop lying on TV, according to people familiar with the conversation. In appearances on business-television programs earlier that week, Armstrong had accused banks of trying to sabotage legislation that would set a new regulatory framework for digital assets.

The confrontation wasn't quite in line with the annual forum's mission to foster cooperation among global leaders.

As crypto moves swiftly into the mainstream of American finance, some of Wall Street's heavyweights are waking up to the threat. While banks have embraced some aspects of crypto -- helping people invest in bitcoin and using digital assets to make money transfers more efficient -- they are drawing a line at encroachment on their core business: consumer deposits.

Banks and Coinbase are at odds over whether crypto exchanges should be allowed to offer consumers regular payouts for holding digital tokens. These so-called rewards would pay holders of stablecoins a recurring fee, say 3.5%. Stablecoins are digital assets pegged to real-world currency like dollars.

Banks say the payouts are effectively the same as the interest on bank accounts, and since banks offer much less yield -- typically under 0.1% in a checking account -- they worry that the upshot will be that consumers will shift their money in droves into crypto. That, they say, will compromise community banks and lending to businesses. Armstrong, and others in the crypto world, say the free market should reign and that banks can simply pay higher interest rates to compete with stablecoins or get into the stablecoin business themselves.

The legislation, known as the Clarity Act, might shape the future of everyday financial services, including bank deposits and electronic payments.

In the latest push to find a compromise, the White House plans to host a meeting Monday between bank and crypto industry groups, according to people familiar with the matter, with Trump's AI and crypto czar David Sacks expected to be in attendance. Coinbase's head of U.S. policy, Kara Calvert, is slated to attend, some of the people said.

Armstrong, 43, co-founded Coinbase in 2012 and has helped lead crypto's quest for legitimacy and mainstream acceptance. As the head of the roughly $55 billion firm, Armstrong has a powerful voice in industry debates, such as the one playing out in Washington. "We'd rather have no bill than a bad bill," he said on X in a post the day before a Senate committee was poised to vote on a version that could effectively ban companies like Coinbase from offering yield to customers, potentially costing it billions of dollars. Within hours, the vote was abruptly postponed, taking much of the financial world by surprise.

"It's now seen more as Coinbase vs. the banks rather than crypto vs. the banks," said Ron Hammond, head of policy and advocacy at digital assets trading firm Wintermute.

Armstrong's pushback didn't end with his Jan. 14 X post. He echoed his view in TV appearances, telling Bloomberg that bank lobbyists were "out there trying to ban their competition" and accusing banks of lending out their customers' deposits "without their permission essentially." That set up a series of uncomfortable run-ins with bank CEOs at Davos, described by people familiar with the conversations.

"If you want to be a bank, just be a bank," Bank of America chief executive Brian Moynihan told Armstrong during a cordial but somewhat stilted 30-minute meeting last week at the main convention center in Davos.

Citigroup's Jane Fraser gave Armstrong less than a minute of her time. (Coinbase is a client of both Citi and JPMorgan, and the exchange has business partnerships with other banks.)

One minute was more than Wells Fargo CEO Charlie Scharf offered. When Armstrong sought him out, Scharf told him there was nothing for them to talk about. The exchange took place while Dimon, Scharf's one-time boss, idled nearby.

'Bank replacement'

Armstrong, who studied economics and computer science at Houston's Rice University, was an early convert to the ideas of digital money and the blockchain technology that could make it reality. He had read the original bitcoin white paper, published in 2008 by the pseudonymous Satoshi Nakamoto, and while working for Airbnb in 2011 had struggled to send money to South America.

Those experiences helped pave the way for Coinbase, which set about to solve a problem that confounded those eager to invest in cryptocurrencies: There was no place for people to store their digital assets. And when some customers wanted to trade bitcoin, not just keep it safe, Coinbase became an exchange.

Coinbase soon grew out of a cramped San Francisco apartment that served as its first office space. By 2017, when the company's other founder left, Armstrong was its unquestioned leader.

Former colleagues previously told The Wall Street Journal that Armstrong was shy, at times struggling to communicate with some employees and uncomfortable when reprimanding his staff. Some former employees thought he acted like a Vulcan, the "Star Trek" humanoids known for their stoicism.

Armstrong, though, has been far from bashful about his ambitions for Coinbase, which he positioned as the American company to bring crypto into the mainstream. Coinbase's remit now includes everything from electronic payments and stock trades to commodities and prediction markets.

"Ultimately we want to be a bank replacement for people," he said on Fox Business last year. "We want to become a super app and provide all types of financial services."

As the business expanded, Armstrong poured millions into developing the industry's biggest lobbying effort. Following multiple crypto booms and busts, Coinbase went public in April 2021, briefly hitting a market value of $100 billion and pushing Armstrong's stake to some $13 billion.

After surviving industry collapses in 2022 and regulatory attacks under the Biden administration in 2023, Armstrong fought back -- and found his voice. The reluctant public speaker who preferred to keep his headphones on while coding in the office was now the crypto industry's willing spokesman in Washington, where the views about crypto were about to change dramatically.

Coinbase poured about $75 million into the 2024 election through a network of super political-action committees, with the goal of fighting skeptical candidates, and set up a grassroots organization to build public support for crypto bills. The super PAC group said Wednesday that it holds $193 million.

Trump's 2024 victory offered Armstrong a window to secure the policy wins he had been chasing for a decade. He praised Trump for creating the "dawn of a new crypto era," then attended a " Crypto Ball" featuring Snoop Dogg around Trump's inauguration. At least every two months, the executive ditches his usual T-shirt and black jacket for suited visits to Capitol Hill.

"Coinbase is at the tip of the spear in everything in the United States related to crypto," said Anthony Scaramucci, the founder of SkyBridge Capital and a longtime crypto investor.

Last summer, Trump signed into law the Genius Act, which clears a path for many companies to issue stablecoins. The law has spurred a boom in stablecoin activity. It prevents issuers themselves from paying interest, but doesn't cover exchanges or third parties like Coinbase. That's an omission bank industry groups saw as a loophole, precipitating the current fight over the Clarity Act.

Long road

The House of Representatives passed its version of the Clarity Act last year, but getting it through the Senate is seen as much more difficult, in part because of disagreements over what rules crypto firms should follow. The Senate Agriculture Committee, which is overseeing the portions of the legislation pertaining to the Commodity Futures Trading Commission, advanced its version on Thursday. Lawmakers ultimately have to pass a version through the full Senate, then reconcile differences with the House.

Moynihan's point to Armstrong, according to people familiar with the conversation, was that if Coinbase and other crypto companies want to offer deposit-style services, then many banks feel they should submit to the same regulatory burdens as they do. Regulators like the Federal Reserve and the Office of the Comptroller of the Currency scrutinize banks' risks, hold routine examinations of their operations and impose rules on how much capital they set aside for the loans and investments they make.

"The fight over rewards is really an anomaly in our collaborative relationship with the banks. We work closely with them and have announced multiple partnerships," said Faryar Shirzad, Coinbase's chief policy officer.

Coinbase has a lucrative partnership with the stablecoin issuer Circle that lets it get a big chunk of the revenue from the popular token USDC. Through that unique partnership, unlike others in the crypto industry, Coinbase offers some holders of USDC 3.5% rewards. It says those incentives help attract users and give consumers more choices in a world with paltry checking account interest rates.

"There's no reason to prohibit paying interest to consumers," Armstrong said in an interview with the Journal last year.

As the Clarity Act progressed toward a vote in Congress, banks began making their case fiercely behind closed doors. Citing a government estimate, they warned senators that some $6.6 trillion in deposits could be at risk of being siphoned out of the traditional financial system. The lobbying paid dividends and the draft of the nearly 300-page bill included provisions and potential amendments that Armstrong saw as a defeat for crypto. He pulled his support, and Senate Banking Committee head Tim Scott (R., S.C.) canceled the vote hours later.

Armstrong has ideas for how to solve the impasse, telling Moynihan that there could be a new class of stablecoin issuers that would be allowed to pay rewards if they met tighter regulatory standards, the people familiar with the matter said. That could allow banks to theoretically jump into the game on a level playing field with Coinbase. Others have proposed banning most reward payments but having a narrow list of exempted uses for Coinbase and others.

Any deal would likely need Armstrong's backing to move forward.

"It is Coinbase who is seen as the one who has to say yea or nay to this legislation," said Hilary Allen, a professor of law at American University and a securities laws expert who is a crypto skeptic. "That is a truly shocking state of affairs."