Senate Advances GENIUS Act for $250B Stablecoin Market Regulation

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 bill, introduced by Senator Bill Hagerty, aims to create a regulatory framework for the nearly $250 billion stablecoin market, which is currently dominated by Tether (USDT) and Circle’s USDC (USDC).

The GENIUS Act requires stablecoins to be fully backed by US dollars or similarly liquid assets, mandates regular security audits, and necessitates approval from federal or state regulators. Only licensed entities can issue stablecoins, while algorithmic stablecoins are restricted. The bill was initially blocked by several Democratic senators on May 8 due to concerns over potential conflicts of interest involving Trump’s crypto ventures and anti-money laundering provisions. However, after revisions, the bill gained enough bipartisan support to proceed to a vote.

On May 20, the Senate voted 66-32 to advance the bill, with several Democrats changing their votes to pass the motion to invoke cloture. This procedural vote sets the bill up for debate on the Senate floor. Republican Senator Cynthia Lummis, a key backer of the bill, expressed optimism about its passage by May 26, Memorial Day in the US. The GENIUS Act builds on the discussion draft submitted by former Representative Patrick McHenry’s Clarity for Payment Stablecoins Act in October.

Despite concerns from Senator Elizabeth Warren of Massachusetts, who argues 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 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.