Nine Democratic Senators Withdraw Support for GENIUS Act Over Concerns

On May 3, a group of nine Democratic Senators announced their withdrawal of support for the landmark U.S. stablecoin legislation, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, unless significant changes are made to the bill. The Senators, including Raphael Warnock, Catherine Cortez Masto, Ben Ray Luján, John Hickenlooper, and Adam Schiff, expressed concerns about the current version of the bill in a joint statement. They noted that while they are open to working with their colleagues to address these issues, they would be unable to vote for cloture if the current version of the bill comes to the floor.

The Senators highlighted several critical areas that need stronger provisions, including anti-money laundering measures, regulations for foreign issuers, national security considerations, and the safety and soundness of the financial system. They also emphasized the need for accountability for those who do not meet the act’s requirements. The Senators believe that without these revisions, the bill leaves consumers unprotected and vulnerable.

This move by the Senate Democrats is significant because it includes Senators who initially supported the bill when it passed the Senate Banking Committee in March. Notably, Senators Kirsten Gillibrand and Angela Alsobrooks, who co-sponsored the GENIUS Act alongside lead sponsor Republican Senator Bill Hagerty, did not sign the statement. This suggests a potential divide within the Democratic Party regarding the bill's current form.

The GENIUS Act, introduced by Senator Bill Hagerty on Feb. 4, 2025, aims to provide a regulatory framework for U.S. payment stablecoins. The bill requires stablecoin issuers to ensure that each issued token is backed 1:1 by U.S. Dollars, insured bank deposits, or short-term Treasury bills. Issuers can choose between federal oversight under the Office of the Comptroller of the Currency (OCC) and state-level supervision.

The Senate Banking Committee passed the GENIUS Act in March with an 18-6 vote. Since then, Republicans have made changes to the bill in an effort to win over Democrats. However, the recent statement by the Senate Democrats is likely to complicate the Republicans' plans to push the bill for a floor vote by the end of May. The bill requires the support of at least seven Democrats to pass the Senate, and the Democrats' withdrawal of support could delay the legislation.

Senator Hagerty responded to the Democrats' statement by emphasizing the importance of advancing legislation that ensures U.S. leadership in the digital asset space and protects the U.S. Dollar. He stated that the choice is between moving forward with bipartisan changes or showing that digital asset and crypto legislation remains a solely Republican issue. This response underscores the bipartisan nature of the debate and the need for compromise to move the legislation forward.

In addition to the Senate Democrats, other critics of the bill include Senator Elizabeth Warren, who warned that the bill could allow big-tech companies and other conglomerates to issue their own stablecoins. A group of 20 community banking organizations also voiced objections, arguing that the bill could displace traditional deposits and expose the financial system to new vulnerabilities. These criticisms highlight the broader concerns about the potential impact of the GENIUS Act on the financial system and the need for comprehensive regulation.