Senate Advances GENIUS Act to Regulate $250 Billion Stablecoin Market

The US Senate has made a significant move towards regulating stablecoins by advancing the Guiding and Establishing National Innovation for US Stablecoins Act, or GENIUS Act. The key procedural vote passed with a 66-32 vote on May 20, allowing the bill to proceed to debate on the Senate floor. This development comes after several Democratic senators initially blocked the bill's progress in May due to concerns over potential conflicts of interest involving President Donald Trump’s crypto ventures and anti-money laundering provisions.

Republican Senator Cynthia Lummis, a key backer of the bill, had previously expressed optimism about the bill's passage, suggesting a "fair target" of May 26 for its completion. The GENIUS Act, introduced by US Senator Bill Hagerty on February 4, aims to regulate the nearly $250 billion stablecoin market, which is currently dominated by Tether (USDT) and Circle’s USDC (USDC). The bill mandates that stablecoins be fully backed, undergo regular security audits, and receive approval from federal or state regulators. Only licensed entities can issue stablecoins, and algorithmic stablecoins are restricted under this legislation.

Several Democratic senators withdrew their support for the bill on May 8, citing concerns over potential conflicts of interest and anti-money laundering provisions. However, the bill was subsequently revised to garner enough bipartisan support to proceed to a vote. The GENIUS Act builds on the discussion draft submitted by former Representative Patrick McHenry for the Clarity for Payment Stablecoins Act in October. The bill's advancement marks a significant step in establishing a regulatory framework for stablecoins, ensuring consumer protection, national security, and responsible innovation in the financial sector.

Senate Majority Leader John Thune criticized Democrats for initially blocking the measure, emphasizing that the bill reflects a bipartisan consensus and has undergone an open and bipartisan process. The procedural vote on May 20 was to limit debate on the bill, allowing the Senate to move forward to final passage. Despite concerns from Senator Elizabeth Warren of Massachusetts, who argued that the bill puts consumers at risk and enables corruption, the measure has strong bipartisan support. Senator Bill Hagerty of Tennessee, who sponsored the legislation, defended it as a necessary step to prevent innovative technology from moving offshore due to regulatory uncertainty.

The GENIUS Act requires stablecoins to be fully backed by US dollars or similarly liquid assets and mandates annual audits for issuers with more than $50 million in reserves. This legislation is seen as a crucial step in regulating the stablecoin market, which has grown rapidly in recent years. The Senate's advancement of the GENIUS Act marks a significant milestone in the ongoing efforts to establish a regulatory framework for stablecoins, ensuring that they operate within the bounds of the law while fostering innovation in the financial sector.