GENIUS Act Advances in the Senate, Setting the Stage for Potential Stablecoin Legislation

Stablecoins, despite their name, have had a relatively volatile path toward regulation in the U.S.

The House Financial Services Committee on Wednesday (May 17) voted to advance a bipartisan legislation package that would create a new regulatory framework for cryptocurrency firms and place the industry largely under the purview of the Securities and Exchange Commission (SEC).

The committee’s 28-21 vote on the Financial Innovation and Inclusion Act (H.R. 3860) bundles together several cryptocurrency-related bills that previously passed the House. It also includes an 11th-hour addition of the Durbin-Marshall credit card routing mandates, which could yet be dropped.

The legislation package now faces an uncertain fate on the House floor, with House Democrats largely united in their support for a broader consumer protection agenda that includes strong antitrust measures. This alignment could complicate the chances of the largely industry-backed cryptocurrency legislation to move forward.

The legislation package is the House's response to the rapid developments in the digital asset sector and the growing interest in regulating cryptocurrencies.

The bill would create a new regulatory framework for cryptocurrency firms, placing the industry largely under the SEC’s supervision. It would also charge the agency with establishing a regulatory program for crypto exchanges and require firms to register their offerings with the SEC in a format similar to the Form S-1 used for traditional IPOs.

The legislation also includes provisions to:

* safeguard users of crypto products and services;

* impose new anti-money laundering requirements on crypto firms;

* facilitate cross-border cooperation on crypto regulation; and

round up the administration on the economic impact of its crypto policies.

The legislation package is a significant step forward for the cryptocurrency industry in the U.S. It could help to create a more level playing field for crypto firms and promote responsible innovation in the sector.

However, the legislation has also faced criticism from some consumer groups, who argue that it does not go far enough to protect consumers from predatory practices by crypto firms.

The legislation package is now expected to be debated on the House floor in the coming weeks. It remains to be seen whether the bill will be able to overcome the political and ideological hurdles to become law this year.

Here is a summary of the key bills that are included in the legislation package:

* The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins of 2025 Act): This bill, which is sponsored by Rep. Bill Foster (D-Mass.) and Rep. Ann Wagner (R-Mo.), would create a federal framework for stablecoins, used to be pegged to the value of the dollar. It would require issuers of stablecoins to maintain reserves in liquid, safe assets, adhere to anti-money laundering protocols and prioritize investor repayment in bankruptcy. The House Financial Services Committee approved the measure in March.

* The Lummis-Gillibrand Responsible Financial Innovation Act: This Senate bill, which is sponsored by Sen. Cynthia Lummis (R-Wyo.) and Sen. Kirsten Gillibrand (D-N.Y.), would place crypto firms largely in the regulatory purview of the SEC and the Commodity Futures Trading Commission (CFTC). It would also create a new agency within the Treasury Department to focus on digital assets. The Senate Banking Committee approved the bill in April.

* The Keep Innovation Advanced in America Act: This bill, which is sponsored by Rep. Maxine Waters (D-Calif.) and Rep. Steve Scalise (R-La.), would amend the Securities Act of 1933 to create a new registration process for digital asset offerings. It would require firms to register their offerings with the SEC in a format similar to the Form S-1 used for traditional IPOs. The House Financial Services Committee approved the bill in April.

* The Durbin-Marshall credit card routing mandates: This measure, which was tacked onto the cryptocurrency legislation at the last minute, is named after the sponsors of the 2010 Dodd-Frank Act provision that imposed similar requirements on debit cards. It would require card networks like Visa and Mastercard to offer at least two routing options for transactions. The goal is to increase competition among card networks and lower costs for merchants.

The legislation package is still in a fluid state and could be subject to further changes before it is brought to a vote by the full House. It is also unclear whether the Senate will have time to vote on its own version of a cryptocurrency bill this year.