The Senate failed to advance cryptocurrency legislation that would create a regulatory framework for stablecoins and companies that want to be licensed to issue stablecoins. The Genius Act had bipartisan support when it was first introduced, but it fell short after two Republicans, Sens. Josh Hawley, Mo., and Rand Paul, Ky., joined Democrats in voting against it.
Democrats contend that its consumer and money laundering protections don’t go far enough. Sen. Paul said he didn’t think there was a need for government regulation.
If Congress ultimately passes this bill into law, it would be the first time digital currency is officially introduced into the U.S. financial system.
“In the United States, stablecoins have operated in a legal grey zone. Stablecoin issuers trying to follow the rules can’t be sure what rules to follow,” Majority Leader John Thune, R-S.D., said.
What’s a stablecoin?
According to Coinbase, stablecoins are cryptocurrencies with a stable value because they are directly tied to an asset, like the U.S. dollar.
What does the Genius Act do?
The Genius Act sets up an application process and operating rules for companies that want to be stablecoin issuers.
It requires stablecoins to be backed at least one-to-one with reserves, including the U.S. dollar, Treasury notes or bonds or other approved assets. Those reserves must be held in a regulated state or federal institution.
There are also protections against money laundering and national security threats. Issuers would need to monitor and report suspicious activity, comply with U.S. sanctions and block transactions that violate state and federal laws.
The legislation also clarifies that payment stablecoins are not backed by the U.S. government and are not subject to deposit insurance from the FDIC.
“Stablecoins are operating today without any of these requirements. And not passing this bill means allowing the status quo to continue – no consumer protections, no national security safeguards, and the risk of arbitrary enforcement action from financial regulators,” Thune said.
What does President Trump’s meme coin have to do with this?
The bill’s sponsors said they were addressing concerns about money laundering and consumer protections. Then came President Trump’s stable meme coin.
The investment firm MGX, which has ties to the United Arab Emirates sovereign wealth fund, announced it would use Trump’s stablecoin to invest $2 billion in Binance, a cryptocurrency exchange.
Democrats used that as leverage to push for more change.
“President Trump and the crypto industry are not trying to jam through this bill because they know it will make corruption and bribery harder,” Sen. Elizabeth Warren, D-Mass., said. “They’re trying to jam it through because they know it will help turbocharge the size and scale of the stablecoin market and help boost the value of their own stablecoin ventures.”
Will the bill have a second chance?
Supporters of the bill, including the Trump Administration, contend that it is necessary to keep crypto jobs and innovation in America and to preserve the dominance of the American dollar. Multiple lawmakers who voted against it said they agree and want to make some changes to get it across the finish line.
