Senate Standoff: Democrats Withdraw Support for Stablecoin Bill

Another political standoff is unfolding in the U.S. Senate, where nine Democratic lawmakers have pulled their support for the GENIUS Act, a long-awaited bill designed to establish a regulatory framework for U.S. stablecoins.

According to Politico, the group includes the same senators who had previously worked with Republicans to advance the bill in committee. 

The reversal marks a significant shift from earlier bipartisan agreements and has caught Republican members off guard.

Key factors behind the reversal include:

• Closed-door discussions with Senate Majority Leader Chuck Schumer
• Concerns raised by Senator Elizabeth Warren over potential conflicts of interest tied to crypto business activities of the Trump family 

Nevertheless, negotiators remain optimistic that the legislation can be revised and reintroduced.

GENIUS Act: Framework and Friction

The GENIUS Act (short for Guiding and Establishing National Innovation for US Stablecoins) proposes strict oversight for stablecoin issuers, including: 

• Full backing of reserves in U.S. dollars or short-term Treasury securities 
• Monthly disclosure of reserve volumes
• Mandatory annual audits for issuers with market capitalizations above $50 billion

The bill cleared the Senate Banking Committee in March. Since then, lawmakers have amended the proposal to include provisions on:

• Anti-money laundering 
• National security
• Oversight of foreign issuers 

However, some Senate Democrats argue the latest version falls short. They say it leaves loopholes that could pose risks to both consumers and the financial system.

Related: Is Europe Squeezing Out USDT? MiCA’s Impact on the Crypto Status Quo

Democratic Rift: What’s Driving the Disagreement

At a closed-door meeting late last week, Senate Majority Leader Chuck Schumer reportedly urged Democratic colleagues to hold back support for the GENIUS Act, aiming to extract further concessions from Republicans, particularly on tighter regulation of Tether and other foreign stablecoin issuers.

“This isn’t some reversal out of nowhere by Dems,” Senator Ruben Gallego wrote on X. He argued that the final version of the bill undermined key provisions that had been agreed to earlier in the negotiation process.

Senator Elizabeth Warren, a vocal critic of the crypto industry, once again raised concerns about a potential conflict of interest involving the Trump family. “The Senate shouldn’t pass a crypto bill this week to facilitate this kind of corruption,” she wrote on X, referring to the $2 billion deal between the UAE and a company founded by the former president’s son.

Path Forward for the Stablecoin Bill

Senator Bill Hagerty, a Republican co-sponsor of the bill, responded to the Democrats’ withdrawal by urging lawmakers not to stall progress on crypto regulation.

We have a choice here. Move forward and make any remaining changes needed in a bipartisan way, or show that digital asset and crypto legislation remains a solely Republican issue,

Hagerty said in a statement.

Both parties acknowledged the need for compromise. In a joint statement, several lawmakers expressed a willingness to continue negotiations to address unresolved concerns ahead of a potential Senate vote next week.

Related: Trust the Rails: Why Stablecoins Just Overtook Visa—and What Comes Next