Nine Senate Democrats withdrew support from the stablecoin bill on May 3, just before the legislation was scheduled for a Senate vote. The lawmakers said they would oppose the stablecoin bill in its current form unless major policy issues are addressed.
Their opposition targets the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, introduced by Senator Bill Hagerty. This stablecoin legislation aims to create a federal framework for digital dollar-backed tokens.
The joint statement came from Senators Ruben Gallego, Mark Warner, Lisa Blunt Rochester, and Andy Kim, among others. All four previously supported the bill when it passed the Senate Banking Committee in March.
They stated,
“The bill still has numerous issues that must be addressed.”
They said they would not support a procedural vote to move the stablecoin bill forward without further changes.
Lawmakers Seek Stronger Safeguards on Stablecoin Legislation
The Democratic senators said the revised stablecoin legislation did not go far enough. They demanded stronger rules on Anti-Money Laundering (AML), protections for national security, controls on foreign issuers, and better enforcement against firms that break the rules.
Despite the bill’s adjustments since March, the lawmakers claimed the updates failed to meet their expectations. Their demands included clear accountability measures for companies that violate the regulatory framework.
Other signatories included Senators Raphael Warnock, Catherine Cortez Masto, Ben Ray Luján, John Hickenlooper, and Adam Schiff. They joined in urging changes to the GENIUS Act before it can move forward in the Senate.
The senators also emphasized they are still open to working on the stablecoin bill, stating they “are eager to continue working with our colleagues to address these issues.”
Gillibrand and Alsobrooks Absent From Opposition Letter
Senators Kirsten Gillibrand and Angela Alsobrooks, both co-sponsors of the GENIUS Act, did not sign the letter. Their absence suggests they may still support the current version of the stablecoin bill, though no formal statement was issued from either office.
The Senate will likely begin considering the bill on the floor in the coming days. The first vote on the stablecoin legislation could happen next week, though the recent opposition may delay that timeline.
If passed, the GENIUS Act would mark the first time the U.S. implements a direct regulatory structure for stablecoins. However, the recent statement from pro-crypto Democrats could halt progress.
Fed Faces Pushback Over Existing Crypto Restrictions
Outside Congress, criticism of the Federal Reserve’s crypto stance continues. On April 27, Custodia Bank CEO Caitlin Long accused the Federal Reserve of maintaining outdated policies that limit direct bank involvement with crypto assets.
She said the Fed had recently rescinded four guidelines but kept a Jan. 27, 2023, policy intact. This guidance, issued in coordination with the Biden administration, blocks banks from issuing stablecoins on public blockchains or holding digital assets directly.
Long stated that a federal stablecoin bill could override this policy if passed. “Congress should hurry up,” she said, pointing to the stalled progress of the GENIUS Act.
Her comments highlighted growing pressure from within the crypto sector to establish consistent federal crypto regulation for stablecoins.
Democrats Cite Foreign Issuer and Security Concerns
In their statement, the Democratic senators flagged concerns about foreign issuers of stablecoins. They argued that without stronger rules, national security could be at risk. The statement did not name any specific foreign firms or regions.
The senators also noted the importance of legal penalties for those violating the proposed regulations. They did not outline exact consequences but made clear that current provisions lacked effective enforcement.
The stablecoin bill, still led by Senator Bill Hagerty, remains scheduled for floor debate, though its future now appears uncertain following the Democrats’ opposition.
