Stablecoin Bill Gains Bipartisan Support in Senate, Aims to Unlock Trillions in Treasury Demand

David Sacks, the top crypto and AI advisor to President Donald Trump, has expressed confidence that the stablecoin legislation currently moving through the Senate, known as the GENIUS Act, will pass with significant bipartisan support. This bill aims to regulate stablecoins, a subset of cryptocurrencies whose value is tied to real-world assets like the U.S. dollar. Sacks believes that the passage of this legislation could unlock trillions of dollars in demand for U.S. Treasuries by providing a legal framework for stablecoins, which currently amount to over $200 billion but remain unregulated.

The GENIUS Act recently cleared a key procedural vote in the Senate, with 15 Democrats joining Republicans to pass the cloture threshold. This vote indicates that the bill has the necessary support to avoid a filibuster and move forward. Sacks emphasized that the administration expects the bill to pass, although he did not address concerns from Democrats about potential conflicts of interest involving the president and his family's cryptocurrency ventures.

Stablecoins offer a more efficient, cheaper, and smoother payment system, which could extend the dominance of the U.S. dollar online. The White House has been aggressively backing this effort, despite growing concerns over potential conflicts of interest. Sacks himself sold $200 million in crypto-related holdings before taking his White House job, while the Trump family has been involved in building a crypto empire, including financial backing for World Liberty Financial, which launched its own stablecoin, USD1, backed by Treasuries and dollar deposits.

However, the path to passage is not entirely smooth. Senator Josh Hawley added a controversial rider to the bill that would cap credit card late fees, which could alienate banking allies and stall final approval. Despite these challenges, Sacks remains optimistic about the bill's prospects, framing it as a national economic strategy that could transform the U.S. payment system and bolster demand for U.S. Treasuries.

The banking industry has expressed concerns over the rise of yield-bearing stablecoins, which threaten their traditional profit models. Critics argue that banks rely on fractional reserve practices to profit while offering low returns to depositors, and fear that stablecoins may expose and disrupt this system. The US Securities and Exchange Commission approved the first yield-bearing stablecoin security by Figure Markets in February, and since January 2024, yield-bearing stablecoins have soared to $11 billion in circulation, representing 4.5% of the total stablecoin market.