The GENIUS Act (Guiding and Establishing Innovation for U.S. Stablecoins) Fails to Advance in the Senate

On Thursday, May 8th, the Senate voted to block the advancement of the GENIUS Act, a first-of-its-kind bill meant to solidify the regulatory framework for stablecoins.

The Senate procedural vote on the GENIUS Act, a bipartisan bill to create a federal regulatory framework for stablecoins, has failed to reach the 60 votes needed for advancement. The vote, which was held on Thursday, May 8, saw 49 senators vote to proceed with the bill, while 11 senators voted against it.

The bill, which is sponsored by Senate Majority Leader John Thune (R-S.D.) and had the support of Senate Minority Leader Charles Schumer (D-N.Y.), faced opposition from several Democrats, who had concerns about the bill's provisions on foreign-issued stablecoins and the lack of measures to prevent corruption.

Several Democrats, including Senators Elizabeth Warren (D-Mass.) and Cynthia Lummis (R-Wyo.), had been working to add amendments to the bill, but they were unable to reach an agreement with Republicans.

The vote came as a blow to Republicans, who had hoped to pass the bill as their first major piece of legislation in the 118th Congress. The bill is also a priority for the Biden administration, which has been urging lawmakers to create a clear regulatory framework for stablecoins.

"We’ve had an open process on this bill so far, so why stop now?" Thune said on the Senate floor. "If senators would like the opportunity to make further modifications to the bill, I encourage them to vote for cloture. Once we’re on the bill, we can discuss changes here on the floor."

Cloture would have advanced the bill to a vote, avoiding any potential filibuster. But the vote failed, capping off a week of frenetic negotiations held in secret where Lummis and Senator Bill Hagerty (R-Tenn.) trundled all over the Hill to coax nine Democratic holdouts.

"We need time," one Democrat, Senator Ruben Gallego (D-Ariz.), told Politico.

Later, expressing Democrats’ apparent frustration with the process, Gallego used more colorful language.

"You can't try to f*** us and then say, hey, deal with it," he said. "That's just not going to work, especially when you still need our votes."

At least one Democrat, Senator Tammy Baldwin (D-Wis.), ultimately decided not to vote for the bill.

In a statement to Jewish Insider, Baldwin said she was "disappointed that we were unable to complete work on a bipartisan bill to regulate stablecoins."

"I hope that in the coming weeks, we can continue to collaborate in a way that respects the time and contributions of all senators," her statement concluded.

The House Financial Services Committee on April 3rd passed its own stablecoin bill, called The Stable Act (Stablecoin Transparency and A Better Ledger Economy). While the Stable Act and the Genius Act share many similarities, they are not identical.

One notable difference is the way each respective bill addresses foreign-issued stablecoins.

One of the main criticisms leveled at the Genius Act is the ostensible carve-outs for foreign-issued stablecoins. While there are imperatives for foreign-issued stablecoins to cooperate with law enforcement, regulations as a whole do not appear as strident as those applied to U.S.-based companies.

The language of the Stable Act is slightly more ambiguous. It maintains a more loose regulatory framework, allowing 18 months for foreign-issued stablecoins to adhere to U.S. law or a comparable jurisdiction.

The elephant in the room of course, is Tether. The El Salvador-based company issues USDT, which commands between 60% to 70% of all trading volume and earned Tether over $13 billion in profit last year.

Having run afoul of regulators over the years, Tether has remained resilient. In the past year, the company has actively courted Washington. Its strongest business ally is the investment bank Cantor Fitzgerald, which until recently was run by Commerce Secretary Howard Lutnick.

While the perceived foreign-issued stablecoin loophole of the Genius Act provokes the ire of Democrats, the reality of Tether’s outsized chunk of the market demands attention. If Tether were cut off from the U.S., major liquidity problems could quickly arise.

That said, CEO Paolo Ardoino spoke recently of issuing a new U.S.-based stablecoin in the near future.

A majority of Democratic Senators were never on board with the Genius Act. Those who soured on the bill recently seem to have done so at least partially, swayed by the timing of $2 billion flowing into Trump’s World Liberty Financial’s stablecoin.

Senator Josh Hawley (R-Mo.) voted no on the Genius Act because he fears it gives big tech too much power to create their own currencies. However, prior to casting his vote, he made comments that suggested his position was malleable.

Enough Democrats, in the next vote, might prove to be equally malleable. Recently