Crypto Bills Rejected by House, Circle Stock Drops 7%

The recent "Crypto Week" in the United States encountered a significant hurdle as multiple cryptocurrency-related bills were rejected by the House of Representatives. The failed legislation included the GENIUS Act and the CLARITY Act, both of which were pivotal in establishing regulatory frameworks for stablecoins and defining the classification of cryptocurrencies. The rejection of these bills has had a notable impact on the cryptocurrency market, with Circle, the issuer of the USDC stablecoin, experiencing a temporary stock price drop of over 7%.

The House of Representatives voted 196 in favor and 223 against the procedural motion, with 13 Republican representatives joining the Democrats in opposing the bill. This vote failure not only highlighted the internal divisions within the Republican Party but also stalled the progress of legislation that was widely expected to pass smoothly. The House leadership planned to attempt another vote later in the day, but it remained unclear whether any modifications to the bill or its rules would be made to garner support from conservative members.

The GENIUS Act aimed to establish a federal regulatory framework for stablecoins, requiring 100% reserves and monthly audits, and allowing qualified private entities to issue digital dollars with government approval. The CLARITY Act sought to define whether cryptocurrencies are securities or commodities, with oversight by either the Securities and Exchange Commission or the Commodity Futures Trading Commission. Additionally, the bill included a controversial provision prohibiting the Federal Reserve from issuing a central bank digital currency, which sparked significant debate within the Republican Party.

One of the key opponents of the vote argued that the GENIUS Act did not include a prohibition on CBDCs, despite a previous executive order that explicitly called for such a ban. This representative also criticized the House Speaker for not allowing amendments to be proposed.

The President, in a post on his social media platform, had earlier expressed optimism about the legislation, stating that it would position the United States as a global leader in digital assets. However, the internal divisions within the Republican Party thwarted these legislative efforts, dealing a blow to the cryptocurrency industry's hopes for regulatory clarity and mainstream adoption.

Circle, which holds approximately 24% of the global market share for dollar-pegged stablecoins, had viewed this legislation as a crucial step towards the mainstream adoption of stablecoins and enhanced regulatory clarity in the United States. The industry had invested over 245 million dollars in lobbying and political contributions in 2024 alone, aiming to create a Congress that is more supportive of digital assets. The Treasury Secretary had previously stated that the passage of the GENIUS Act could potentially expand the stablecoin market from its current size of several thousand billion dollars to over 20,000 billion dollars.

The rejection of these bills underscores the challenges faced by the cryptocurrency industry in achieving regulatory clarity and mainstream acceptance. Despite the setback, the industry continues to advocate for legislation that would provide a clear regulatory framework, allowing for the responsible growth and innovation of digital assets.