In brief
- GENIUS Act seeks to establish a comprehensive regulatory framework for U.S. stablecoins.
- The bill faces criticism over potential impacts on traditional banking.
- Its legislative code differs from the House’s STABLE Act in regulatory approach and reserve assets.
Senate Majority Leader John Thune (R-SD) initiated procedures Wednesday to expedite a vote on the first-ever regulatory framework for stablecoins in the U.S.
Thune is urging senators to fast-track the GENIUS Act, a bill that seeks to regulate stablecoins pegged to the U.S. dollar. The bill is sponsored by Senator Bill Hagerty and co-sponsored by Senators Tim Scott (R-SC) and Cynthia Lummis (R-WY).
It’s part of a “critical first step” to deliver on President Donald Trump and the American people’s “mandate to advance a regulatory framework for digital assets,” National Republican Senatorial Committee chair Scott said in a statement on Thursday.
The legislation passed out of committee earlier in March, with Senator Hagerty saying he’s expecting a full floor vote by the end of April.
The GENIUS Act’s significance extends beyond creating rules for stablecoins. More broadly, it aims to cement U.S. dollar dominance in global finance.
However, the bill faces substantial opposition from traditional banking advocates.
The Senate stablecoin bill is “deeply flawed” and poses “grave and unacceptable dangers” to consumers and the broader financial system, Arthur Wilmarth, Professor Emeritus of Law at The George Washington University, opined in March in an American Banker piece based on a policy brief he wrote in February.
Wilmarth argues that nonbank stablecoin issuers could compete with FDIC-insured banks by offering “shadow deposits,” potentially undermining the traditional banking system.
The professor has voiced concerns that the bill could allow Big Tech and other commercial enterprises to acquire non-bank stablecoin issuers and use stablecoins to enter the banking industry.
It’s worth noting that the Senate’s GENIUS Act, in its current version, differs from the House’s STABLE Bill in three key areas.
The Senate bill allows money market funds to be used as reserves, while the House version is more restrictive.
Both provide a $10 billion threshold, but with different approaches. They also differ on algorithmic stablecoins: STABLE imposes a two-year moratorium while GENIUS only requires a brief study.
The Trump administration is reportedly eager to have both bills signed before Congress’s August recess.
Last week, Decrypt reported that Coinbase, the largest crypto firm in the U.S., is allegedly trying to prevent both the GENIUS Act and the STABLE Act from reaching floor votes.
Tech venture capital firm Andreessen Horowitz had been “sympathetic” to delaying votes on stablecoin legislation and has been helping Coinbase in its efforts, sources told Decrypt.
Edited by Sebastian Sinclair
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