The bill aims to bring predictability to the stablecoin market with a regulatory system, but Democrats said they want more security-related reforms.
WASHINGTON—A group of nine Senate Democrats announced May 3 that they will not support a bill designed to regulate stablecoins in the cryptocurrency industry.
Stablecoins are digital assets whose value is fixed in relation to the value of another asset, such as the exchange rate of the U.S. dollar or the value of traded commodities, including oil, gold, or another cryptocurrency.
Unlike other cryptocurrencies, whose value frequently fluctuates by large amounts, stablecoins are intended to have a more stable value, which makes them more attractive for larger risk-averse investors such as pension funds, sovereign wealth funds, asset managers, and wealthy family offices.
Presently, stablecoins have no federal regulatory system, which lawmakers say would improve investor confidence and enable growth. The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, sponsored by Sen. Bill Hagerty (R-Tenn.), is intended to create such a system and has bipartisan support in the Senate.
However, after announcing they would support the bill, some Democrats withdrew their backing on May 3, citing alleged deficiencies in the bill’s security provisions.
“[T]he bill as it currently stands still has numerous issues that must be addressed, including adding stronger provisions on anti-money laundering, foreign issuers, national security, preserving the safety and soundness of our financial system, and accountability for those who don’t meet the act’s requirements,” wrote the group of senators, led by Sen. Ruben Gallego (D-Ariz.), ranking member of the Senate Banking Subcommittee on Digital Assets.
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The group included Democratic Sens. Raphael Warnock (Ga.), Adam Schiff (Calif.), Andy Kim (N.J.), Ben Ray Luján (N.M.), Catherine Cortez Masto (Nev.), Lisa Blunt Rochester (Del.), John Hickenlooper (D-Colo.), and Mark Warner (Va.).
Without changes, they have all committed to voting against cloture on the GENIUS Act, which would prevent it from advancing to final passage in the Senate. One Democrat, Sen. Kirsten Gillibrand (D-N.Y.), remains a co-sponsor of the bill.
The announcement came two days after Senate Majority Leader John Thune (R-S.D.) indicated that he would expedite the GENIUS Act’s passage in the Senate. Republicans have 53 senators in the 100-member body, and 60 are required to vote for cloture to advance a bill, meaning that most legislation needs some Democratic support to advance. The loss of support from the group of Democrats could be fatal to the bill’s chances.
Hagerty, the bill’s lead sponsor, criticized the Democrats’ decision in comments provided to The Epoch Times.
“We cannot allow partisan games to derail the momentum we’ve seen over the past 3 months on this legislation. We have a choice here: move forward or underscore that digital asset and crypto legislation remains solely a Republican domain,” Hagerty wrote.
Hagerty previously stated that the bill is necessary for the U.S. crypto industry to grow as well as ensure the global economic dominance of the U.S. dollar.
“The GENIUS Act establishes a clear, pro-growth, and secure regulatory framework to modernize our payments system and cement U.S. dollar dominance,” wrote Hagerty in a statement about the bill on his website. The statement explains that the bill would allow institutions to seek licenses to issue stablecoins, define state versus federal boundaries in regulation, and implement reserve requirements.
The withdrawal of Democratic support comes at a time when the family of President Donald Trump is launching new ventures in the crypto industry. In March, the company World Liberty Financial—run by Donald Trump Jr. and Eric Trump, the president’s two eldest sons—introduced a stablecoin named “USD1,” which would be pegged to the U.S. dollar and U.S. Treasury Bonds. Presently, USD1 has a market capitalization of $2.12 billion, according to CoinMarketCap.
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