Senate Advances GENIUS Act 66-32 for Stablecoin Regulation

The U.S. Senate took a significant step forward in regulating stablecoins by advancing the GENIUS Act. On Monday, May 19, the Senate voted 66-32 to move the bill forward, clearing the cloture hurdle and allowing it to advance to full debate and potential amendments on the Senate floor. This procedural move comes after a previous attempt to advance the bill was blocked by Senate Democrats two weeks prior on May 8, which failed 48-49 due to concerns over consumer protections, accountability for corporate issuers, and the exclusion of Donald Trump from ethics rules.

The GENIUS Act, introduced by Sen. Bill Hagerty (R-TN), aims to create a regulatory framework for stablecoins. The bill requires stablecoin issuers to hold full reserves in dollars or highly liquid assets, submit to regular audits, and follow stricter guidelines if issuing more than $50 billion worth of tokens. It also includes oversight for foreign issuers, aiming to limit financial risk and prevent misuse. The bill passed the Senate Banking Committee on March 13 with bipartisan support, and though the most recent version no longer has Democratic sponsors, it has gained traction with both parties.

Behind-the-scenes negotiations led to concessions related to consumer protections, big tech ethics, and conflicts of interest, securing the support of several Democrats who initially opposed the bill. However, critics note that Donald Trump remains exempt from these standards, raising continued opposition from figures like Sen. Elizabeth Warren (D-MA), who said the bill is “worse than no bill at all.”

The bill's advancement marks a major milestone in the ongoing efforts to regulate the cryptocurrency industry. The GENIUS Act would require stablecoin issuers to comply with stringent anti-money laundering regulations, similar to those imposed on banks. Additionally, it would limit the ability of large technology companies to issue their own stablecoins and strengthen the ban on yield-bearing stablecoins. The legislation also ensures that customers' claims take priority in the event of a bankruptcy, providing an added layer of protection for consumers.

Senator Mark Warner, a Democrat from Virginia, acknowledged that the GENIUS Act is not perfect but emphasized that it is a significant improvement over the current lack of regulation. He stated that the stablecoin market has grown significantly and that the U.S. cannot afford to remain on the sidelines. The GENIUS Act sets high standards for issuers, limits the overreach of big tech companies, and creates a safer, more transparent framework for digital assets.

The bill's passage would allow banks and other companies to issue stablecoins, provided they meet specific requirements. These include backing the stablecoins with highly liquid assets such as U.S. Treasuries, providing monthly disclosure of their reserves, and retaining the ability to freeze tokens at the request of law enforcement. This regulatory clarity is expected to open the floodgates for broader access to stablecoins, driving growth in the web3 industry and the greater economy.

However, the GENIUS Act has faced criticism from community banks and state financial regulators, who have expressed concerns about certain provisions in the bill. Critics of the legislation argue that it could enable crime and corruption. Senator Elizabeth Warren, a Democrat from Massachusetts, stated that the bill's basic flaws remain unaddressed and that it could facilitate corruption and undermine national security, financial stability, and consumer protection.

Despite these criticisms, the advancement of the GENIUS Act represents a significant step toward establishing a regulatory framework for stablecoins in the U.S. The bill now requires only a simple majority for final passage, which could occur as early as this week. This development is seen as a major win for crypto legislation and a signal that the U.S. is ready to lead in building the next generation of financial infrastructure.