Senate Rejects GENIUS Act, 48-49, Sparking Global Stablecoin Concerns

On May 8, 2025, the U.S. Senate rejected the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in a 48-49 vote, sparking immediate criticism from Treasury Secretary Scott Bessent. Bessent described the Senate's decision as a "historic misstep" that could have global repercussions, particularly in the realm of digital assets and stablecoins.

In a post on X (formerly Twitter), Bessent emphasized the importance of American leadership in the global stablecoin market. He argued that the Senate's failure to advance the GENIUS Act represented a missed opportunity to assert dollar dominance through innovation. The bill, introduced in February by Senator Bill Hagerty and co-sponsored by prominent Republicans, aimed to provide a comprehensive federal framework for the issuance and regulation of stablecoins in the United States.

The rejection of the GENIUS Act has raised concerns about the future of stablecoin regulation and broader crypto legislation. Senator Cynthia Lummis, a key co-sponsor of the bill, expressed her disappointment, stating that the failure to pass the GENIUS Act was a step backward in securing America’s digital future. John Deaton, a well-known pro-XRP lawyer, called on lawmakers to rise above partisan divisions, highlighting the bipartisan support the bill had just a week prior.

The bill's failure was attributed to several factors, including national security concerns, AML provisions, and last-minute resistance from key lawmakers. Senator Mark Warner, who opposed the bill, stated that its text was "not yet finished," while others hinted at deeper political friction. Some Democrats privately expressed discomfort with President Trump’s recent pro-crypto involvements, which they feared had tainted the legislative process with political overtones.

The collapse of TerraUSD further fueled the debate surrounding stablecoin regulation. The crash erased $40 billion in value, raising concerns about consumer risks in decentralized systems. Proponents of regulation cite TerraUSD as evidence that even decentralized models can fail, leaving users vulnerable. However, critics note a contradiction, as many "decentralized" stablecoins still depend on centralized elements, such as development teams or governance structures.

Despite the procedural defeat, the GENIUS Act can still be reintroduced or brought back to the floor for another vote after further negotiations or revisions. The 48-49 vote was a procedural defeat, not the end. Under U.S. Senate rules, a motion to reconsider permits the Senate to revisit the bill. Introducing USD-backed stablecoins is widely seen as reinforcing and extending U.S. dollar dominance globally by allowing cross-border transactions and expanding dollar access beyond traditional banking systems. Stablecoins tied to the dollar are expected to help maintain its status as the world’s reserve currency and boost demand for U.S. Treasury securities.

However, a U.S. digital dollar issued by the government or linked entities, like the Trump family’s USD1 stablecoin, would be centralized by design, contrasting with the core blockchain principle of decentralization. Ethereum co-founder Vitalik Buterin had previously warned against “centralized stablecoins becoming a tool for geographical control.” The implication is that a U.S.-denominated stablecoin framework could undermine crypto’s decentralized ethos. Lawmakers argue that stablecoins like Tether’s USDT require oversight to prevent criminal exploitation.