US Crypto Bill Stalls as Senate Split Threatens Stablecoin Rules

Senate Crypto Bill Faces Setback as Democrats Withdraw Support

In a significant development, the U.S. Senate's bipartisan effort to regulate cryptocurrencies has encountered a major obstacle. The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, designed to establish a federal framework for stablecoins, is now facing uncertainty as nine Senate Democrats, who previously supported the bill, have withdrawn their backing. 

Understanding the GENIUS Act

Introduced in early 2025, the GENIUS Act aims to provide regulatory clarity for stablecoins—digital assets pegged to traditional currencies like the U.S. dollar. The bill proposes:

• 1:1 Reserve Requirements: Stablecoin issuers must maintain reserves equal to the value of their issued tokens, backed by U.S. dollars or equivalent assets.

• Dual Regulatory Pathways: Issuers can choose between federal oversight by the Office of the Comptroller of the Currency (OCC) or state-level supervision, provided state regulations meet federal standards.

• Consumer Protection Measures: Mandates prompt redemption of stablecoins and compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations.

The bill had garnered bipartisan support, passing the Senate Banking Committee with an 18-6 vote. 

Democratic Concerns and Withdrawal

The recent withdrawal by nine Senate Democrats stems from concerns that the revised bill lacks sufficient safeguards. Key issues include:

• Insufficient AML Provisions: Critics argue the bill does not adequately prevent illicit financial activities.

• National Security Risks: There are fears that foreign stablecoin issuers could exploit regulatory loopholes, posing threats to the U.S. financial system.

• Potential for Big Tech Dominance: The bill's provisions might allow large technology firms to issue stablecoins, potentially disrupting traditional banking. 

Senator Ruben Gallego expressed that the revised bill "backpedaled on a lot of the progress we made," highlighting the removal of previously agreed-upon compromises. 

Political and Industry Implications

The bill's association with former President Donald Trump, including reports of a $2 billion stablecoin deal involving a Trump-affiliated firm, has intensified Democratic scrutiny. 

Furthermore, traditional banks have voiced opposition, fearing that stablecoins could erode their market share and disrupt the financial ecosystem. 

Outlook and Next Steps

Despite the setback, proponents of the GENIUS Act remain hopeful. Senator Kirsten Gillibrand, a co-sponsor, continues to advocate for the bill, emphasizing the need for regulatory clarity to foster innovation while ensuring consumer protection. 

Negotiations are expected to continue, with lawmakers aiming to address the highlighted concerns and achieve a consensus that balances innovation with financial stability.

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

 Check out other news and articles on Google News

Disclaimer:

The articles published on hokanews are intended to provide up-to-date information on various topics, including cryptocurrency and technology news. The content on our site is not intended as an invitation to buy, sell, or invest in any assets. We encourage readers to conduct their own research and evaluation before making any investment or financial decisions.

hokanews is not responsible for any losses or damages that may arise from the use of information provided on this site. Investment decisions should be based on thorough research and advice from qualified financial advisors. Information on HokaNews may change without notice, and we do not guarantee the accuracy or completeness of the content published.