Senate Passes Genius Act Regulating Stablecoins Amid Industry Pushback

The Senate recently passed the Genius Act, a significant piece of legislation aimed at regulating the rapidly growing stablecoin sector. The passage of this bill has sparked both excitement and concern within the crypto industry, with many anticipating swift approval by the House of Representatives and subsequent signing by the President. However, the reality of the situation is far more complex.

It is noteworthy that crypto regulation has become a top legislative priority for Congress, despite not being as critical as issues like healthcare reform or major infrastructure projects. The push for crypto legislation did not emerge from a financial crisis but rather from the industry's substantial political donations and bipartisan support. The collapse of Sam Bankman-Fried’s crypto exchange FTX in late 2022 initially stalled legislative efforts, but the industry's influence has since grown, with companies increasingly adopting stablecoins for various purposes.

Stablecoins, which are typically pegged to the U.S. dollar, have evolved from being primarily used for on-chain trading to being employed for cross-border payments, payroll, and other financial transactions. Major tech firms like Meta and Apple are exploring integration, and Circle, a stablecoin company, had a highly successful IPO. This shift indicates that stablecoins are moving closer to mainstream adoption, making it crucial for the industry to pay attention to regulatory developments.

However, the path to passing the stablecoin bill is not straightforward. The crypto industry is also advocating for a second bill that would establish rules around market structure, including how cryptocurrencies can be issued, traded, and supervised by existing agencies. House Financial Services chair French Hill has stated his intention to bundle the stablecoin bill with the market structure bill, creating a comprehensive crypto mega-bill. This approach has faced opposition from the President, who has called for the stablecoin bill to be passed without delays or additions.

Industry insiders suggest that the most likely outcome is that the House will combine the two bills, which could slow down the legislative process in the Senate. This scenario raises the possibility that Congress may not pass any crypto legislation by the previously set deadline of August. If the two bills are combined, the crypto industry's efforts to enact legislation could face significant challenges. The industry's $100 million investment in political donations may not be enough to overcome the complexities of the legislative process.