Crypto Bill Stalls in Senate as Democrats Withdraw Support

WASHINGTON—The U.S. Senate on May 8 failed to advance a bill that would regulate “stablecoins” in the cryptocurrency market, dealing a blow to a bipartisan effort backed widely by the industry.

The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, sponsored by Sen. Bill Hagerty (R-Tenn.), was intended to bring about a system of regulations for the market of stablecoins, which are digital tokens whose value is pegged to another asset (e.g., the U.S. dollar, bonds, or securities). Stablecoins are attractive to larger and more risk-averse investors—for example, pension funds, sovereign wealth funds, asset managers, and wealthy family offices—who want to invest in cryptocurrency without the risks of value fluctuation. The bill would require permits for issuing stablecoins, prevent “rehypothecation” of stablecoins by lenders, and delineate the boundaries between state and federal regulators, among other rules.

After it was introduced, the GENIUS Act had several Democratic supporters and co-sponsors, indicating that it may receive the requisite 60 votes on cloture to avoid a filibuster and advance to final passage. However, on May 3, several Democratic senators led by Sen. Ruben Gallego (D-Ariz.) announced they were withdrawing support from the bill unless changes were made to address their concerns over what they called deficiencies in the bill’s security provisions. They did not specify the deficiencies, but demanded “stronger provisions on anti-money laundering, foreign issuers, national security, preserving the safety and soundness of our financial system, and accountability for those who don’t meet the act’s requirements.”

The cloture motion considered on May 8 failed in a 48–49 vote.

All Republicans voted in favor of the bill except Sens. Rand Paul (R-Ky.) and Josh Hawley (R-Mo.). Senate Majority Leader John Thune (R-S.D.) voted “nay” only for the purpose of offering a “motion to reconsider” the bill at a later date, as he supports the bill. No Democratic senator voted in favor of the bill, not even Sen. Kirsten Gillibrand (D-N.Y.), who co-sponsored it with Hagerty and three other senators.

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Senate Democratic holdouts had been expecting revised text of the bill, which may have satisfied their concerns as expressed by Gallego and the signatories, until shortly before the vote. Democratic senators cited this reason, as well as the Trump family’s involvement in the stablecoin market, as the reasons for voting against cloture.

It remains to be seen whether the bill will be reconsidered. Hagerty’s office did not immediately respond to a request for comment.