Senators reject GENIUS's proposed stablecoin legislation, amidst progress in discussions.
U.S. Senate Fails Initial Vote on Stablecoin Bill Amid Bipartisan Concerns
The U.S. Senate has failed to pass its first vote on the GENIUS Act stablecoin bill, with significant bipartisan concerns about consumer protection, financial stability, and regulatory oversight.
The bill, which aims to establish a regulatory framework for stablecoins, faced criticism from both Democrats and Republicans. Senator Elizabeth Warren and other Democrats argued that the bill would threaten the financial system by allowing stablecoin issuers to invest in risky assets and engage in risky non-stablecoin activities. They also raised concerns about market dominance, consumer privacy, and lack of consumer safeguards.
Democrats and Republicans alike raised issues with the bill's provisions, such as the lack of timely redemption guarantees for stablecoins, insufficient federal insurance or a federal backstop, limited audit transparency, and inadequate protection of key consumer financial protections.
Republican senators Josh Hawley and Rand Paul voted with the Democrats, while Senator Thune, who had initially supported the bill, changed his vote to no. Senator Thune accused Democrats of obstructing the bipartisan GENIUS Act, claiming that they were denying Republicans or President Trump a bipartisan win.
The bill has gone through six iterations, with many modifications made to satisfy Democrat demands. Senator Ruben Gallego, a Democrat, had warned last weekend that Democrats would not vote for cloture on the current version of the stablecoin bill. Senator Gallego requested postponing the vote until Monday for further debate, but his request was met with objection, requiring unanimous consent.
Despite the concerns, proponents of the bill argue that a regulatory framework is needed to keep stablecoin innovation in the U.S. and maintain global competitiveness. The bill requires permitted issuers to maintain one-to-one reserves in cash or liquid assets and to publicly disclose redemption policies and reserve details, aiming to tighten some rules around stablecoin issuance.
The UAE firm chaired by the country's national security adviser and brother of the President has used the President's family's stablecoin USD1 for a $2 billion payment. The Senate is expected to reconvene on Monday to vote again on the bill.
In conclusion, the Senate's initial failure to pass the GENIUS Act was due to bipartisan concerns about the bill's insufficient protection against financial risks associated with stablecoins and inadequate consumer safeguards. Senator Thune, who chairs the Senate Commerce Committee, has stated that the bill had a bipartisan process and was passed out of the Senate Banking Committee by several Democrats. The Senate is set to reconvene on Monday to continue discussions on the bill.
The U.S. Senate's first vote on the GENIUS Act, a bill aiming to regulate stablecoins, was unsuccessfully passed due to bipartisan worries about consumer protection, financial stability, and regulatory oversight. Both Democrats and Republicans raised objections to the bill's provisions, including insufficient redemption guarantees, lack of insurance or a federal backstop, limited audit transparency, and inadequate consumer protections. Senator Thune, a supporter of the bill, claimed Democrats obstructed it, denying a potential bipartisan win for Republicans or President Trump. Despite the bill's initial failure, proponents argue a regulatory framework is necessary to maintain U.S. competitiveness in stablecoin innovation and keep the business within the country. The Senate will reconvene on Monday to continue discussions and potentially vote again on the bill. An UAE firm, Chaired by the country's national security adviser and brother of the President, has already used a stablecoin (USD1) for a $2 billion payment, hinting at the growing importance of stablecoins in global finance and politics. Insights from the GENIUS Act's analysis will further highlight the complexities in establishing a balanced regulatory environment for stablecoins in the general-news landscape.
