Senate Unable to Move Forward with Groundbreaking Crypto Regulatory Legislation
The Senate was unable to advance cryptocurrency legislation aimed at establishing a regulatory framework for stablecoins and the companies seeking licenses to issue them. The Genius Act initially had bipartisan support, but it failed to pass after two Republicans, Sens. Josh Hawley of Missouri and Rand Paul of Kentucky, voted alongside Democrats against it.
Democrats argue that the bill’s protections for consumers and measures against money laundering are insufficient. Sen. Paul expressed his belief that government regulation is unnecessary.
If Congress eventually enacts this legislation, it would mark the first official introduction of digital currency into the U.S. financial system.
“In the United States, stablecoins have been operating in a legal grey area. Stablecoin issuers attempting to comply with regulations lack clarity on which rules to follow,” said Majority Leader John Thune, R-S.D.
What’s a stablecoin?
According to Coinbase, stablecoins are cryptocurrencies with a stable value as they are directly linked to an underlying asset, such as the U.S. dollar.
What does the Genius Act do?
The Genius Act establishes an application process and operational guidelines for companies wishing to issue stablecoins.
It mandates that stablecoins must be backed at a minimum of one-to-one with reserves, which may include the U.S. dollar, Treasury notes, bonds, or other approved assets. These reserves are required to be held at a regulated state or federal institution.
Furthermore, it includes measures to combat money laundering and address national security threats. Issuers would be required to monitor and report suspicious activities, 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 do not qualify for FDIC deposit insurance.
“Currently, stablecoins operate without these requirements. Failing to pass this bill would mean allowing the status quo to persist—lacking consumer protections, national security safeguards, and risking arbitrary enforcement actions from financial regulators,” Thune remarked.
What does President Trump’s meme coin have to do with this?
The sponsors of the bill claimed they were addressing issues related to money laundering and consumer protection, which became more pressing with the introduction of President Trump’s stable meme coin.
The investment firm MGX, linked to the sovereign wealth fund of the United Arab Emirates, revealed plans to use Trump’s stablecoin to invest $2 billion in Binance, a cryptocurrency exchange.
This development was leveraged by Democrats to advocate for more reforms.
“President Trump and the crypto industry aren’t pushing this bill through because they believe it will combat corruption and bribery; they are doing so because they recognize it will exponentially grow the stablecoin market and increase the value of their own stablecoin projects,” said Sen. Elizabeth Warren, D-Mass.
Will the bill have a second chance?
Proponents of the bill, including the Trump Administration, argue that it is crucial to keep crypto jobs and innovation within the U.S. and to maintain the primacy of the American dollar. Several lawmakers who voted against it have indicated their willingness to collaborate on modifications to help bring it to fruition.
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