GENIUS Act Fails Due to Partisan Politics, Democrats Cite Trump's Crypto Corruption

Senator Tim Scott, the Chairman of the Senate Banking Committee, attributed the failure of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act to partisan politics during a Senate speech on May 8. The bill, which aimed to enhance affordability and innovation in the stablecoin sector, did not reach cloture due to political divisions. Scott criticized the outcome, stating that political gamesmanship overshadowed policy and innovation.

The GENIUS Act had undergone multiple amendments to address concerns raised by Democrats, including stricter requirements for stablecoin issuers and additional provisions for Anti-Money Laundering. Despite these efforts, the bill faced last-minute opposition, which Scott attributed to partisan politics rather than substantive issues with the legislation.

Scott highlighted that the GENIUS Act was a bipartisan achievement within the Banking Committee, emphasizing that its purpose was to make the US economy safer and more affordable for American citizens. He alleged that Democrats changed their stance when the bill gained public attention, driven by efforts to deny President Donald Trump a legislative victory in the digital asset space.

Democrats, led by Senator Elizabeth Warren, raised concerns about potential corruption involving the Trump family-linked stablecoin, USD1. Warren cited a "shady crypto deal with the United Arab Emirates" that led to a significant increase in USD1's market value. She argued that the Senate should not pass a crypto bill that could facilitate such corruption.

On May 1, an Abu Dhabi-based investment firm, MGX, used the Trump-linked stablecoin USD1 to settle a $2 billion investment in Binance. This transaction resulted in a dramatic increase in USD1's market capitalization, from under $137 million to nearly $2.13 billion within a day. Democrats voiced concerns about Trump's crypto-related activities and sponsored multiple bills to address these issues.

Four out of the five pro-crypto Democrats who supported the GENIUS Act in the Senate Banking Committee expressed discomfort with the direction of stablecoin legislation. Representative Maxine Waters explicitly stated her opposition, emphasizing that she would not support the bill unless efforts were made to block the President from owning a stablecoin business.

In response to these concerns, Democrats proposed stricter crypto laws, including the Modern Emoluments and Malfeasance Enforcement Act (MEME Act) and the End Crypto Corruption Act. The End Crypto Corruption Act aims to prevent federal officials and their immediate families from financially benefiting from issuing, endorsing, or sponsoring crypto assets. Senator Jeff Merkley and Senate Minority Leader Chuck Schumer introduced this act to address potential corruption and erode public trust in government.

Senator Warren echoed these sentiments, stating that both Democrats in favor and opposed to the GENIUS Act agree that facilitating Trump's corrupt stablecoin deals is wrong. She claimed that the GENIUS Act would simply enable Trump's crypto corruption, further highlighting the partisan divide surrounding the legislation.