Democratic Lawmakers Withdraw Support for Crypto Bill Amid Corruption Concerns

Democratic lawmakers in Washington have withdrawn their support for a crypto legislation bill, the GENIUS Act, which aims to regulate stablecoins in the US. This shift comes amid growing concerns over corruption, particularly involving the Trump family’s World Liberty Financial (WLFI). In March, the bill passed a critical committee reading with the support of several pro-crypto Democrats, including Senators Ruben Gallego, Mark Warner, Lisa Blunt Rochester, Andy Kim, and Angela Alsobrooks, who voted alongside Republicans. However, the bill faced significant amendments, including stricter requirements for stablecoin issuers and provisions for Anti-Money Laundering, countering terrorism financing, and risk management procedures.

Despite these changes, Democratic concerns persist. Following high-profile crypto deals that have personally enriched President Donald Trump, Congressional Democrats have pulled their support. Four of the five pro-crypto Democrats who initially supported the GENIUS Act issued a statement on May 3, expressing discomfort with the current direction of stablecoin legislation. They highlighted the need for stronger provisions on anti-money laundering, foreign issuers, national security, and accountability. Although the statement did not explicitly mention corruption or Trump, it reflects a growing reluctance among Democrats to engage on cryptocurrency issues.

This reticence is further evidenced by the planned absence of Representative Maxine Waters and other Democratic members from a House of Representatives hearing on crypto titled “American Innovation and the Future of Digital Assets.” This absence would effectively sink the hearing, as House rules require all committee members to be present. The hearing concerns a draft bill announced by Representative French Hill and other top Republicans, which aims to change how US financial regulators treat cryptocurrencies. Waters has been particularly critical of Trump’s WLFI crypto investment firm, characterizing his TRUMP memecoin as “the worst of crypto” and expressing concerns about the WLFI USD1 stablecoin project.

At a markup hearing on April 2 concerning the STABLE Act, Waters stated that the bill, in its current form, allows the president and insiders to “enrich themselves at the expense of everyone else.” She vowed not to support the bill unless efforts are made to block the president from owning his stablecoin business. Even Hill, a Republican leading the charge for crypto in Washington, acknowledged that Trump’s crypto projects complicate Congress’ ability to pass legislation.

Corruption concerns are not the only factor behind Democrats’ hesitation. Some observers believe that the withdrawal of support could be a political ploy. Aaron Brogan, a lawyer specializing in regulatory issues in the cryptocurrency industry, suggested that lawmakers might be using support for the bill as leverage or that an influential donor wants to kill the bill or use it as leverage. Protect Progress, a major political action committee supporting crypto, donated millions to Gallego’s campaign, and it is possible that major donors to the committee would prefer a different bill.

WLFI has already generated significant revenue from Trump token sales and is sealing more deals that will enrich its founders and board members, many of whom are Trump family members. Eric Trump announced that Abu Dhabi-based investment firm MGX would use USD1 to settle its $2-billion investment in global crypto exchange Binance. At Token2049, Eric Trump praised the UAE for its crypto-friendly approach, contrasting it with the regulation-heavy EU. In November 2024, the founder of the Tron blockchain, Justin Sun, became the largest investor in WLFI when he bought some $30 million in TRUMP. More recent reports suggest he has spent nearly $70 million. On Feb. 24, just one month after Trump took office, the SEC halted its civil fraud investigation into Sun despite previous allegations of illegal token distribution and inflated trade volumes.

Critics have claimed that the president is selling exposure to the highest bidder, as WLFI announced that top TRUMP tokenholders would be welcomed to a gala with the president himself. This prompted one lawmaker to suggest impeachment, though this is unlikely in a Congress with Republican majorities in both houses. WLFI has not responded publicly to these criticisms. In a May 5 interview, President Trump downplayed the project, stating that he was “not profiting from anything” and that he hadn’t “even looked” at his portfolio. He also rejected the idea that he should forgo any profits from WLFI, comparing it to his real estate holdings.

With purported scandals and mounting pressure on Democratic officials to block Republican efforts, the possibility of a bipartisan stablecoin bill, much less a comprehensive crypto framework, looks increasingly bleak. The future of stablecoin regulation in the US remains uncertain as political tensions and corruption concerns continue to hinder legislative progress.