GENIUS Act Fails to Advance in the US Senate

A highly anticipated legislation to regulate stablecoins in the U.S. has failed to advance in the Senate after it did not secure enough support from Senate Democrats, who withdrew their vote in the past week.

The legislation, known as the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, had been the subject of great interest in the crypto industry, especially after it was passed by the Senate Banking Committee in February.

The legislation, which is crucial for setting the stage for the next generation of financial technologies, was introduced by Senator Bill Hagerty in February. The GENIUS Act would create a framework for regulating stablecoins, placing them under the Federal Reserve Rules.

The bill, which is also sponsored by Senators Tim Scott, Cynthia Lummis, Kirsten Gillibrand, and Angela Alsobrooks, aims to establish “a safe and pro-growth regulatory framework that will unleash innovation and advance the President’s mission to make America the world capital of crypto.”

Stablecoins legislation was considered a bipartisan effort to increase regulatory clarity after several Democrats showed support over the past few months. Additionally, the bill went through various amendments to address senators’ concerns, including stricter requirements for stablecoin issuers and Anti-Money Laundering (AML) provisions.

However, ten Senate Democrats expressed further concerns about the revised version of the bill on May 3, catching many lawmakers and crypto enthusiasts off guard. Among the critics, four Democrats who previously supported the bill signed the statement.

The lawmakers alleged that the draft bill omitted essential AML and national security safeguards and had ambiguous regulations that could expose crypto markets to exploitation.

Similarly, Senator Elizabeth Warren urged Congress to reject the GENIUS Act as it could pave the way for alleged “crypto corruption.” On May 4, the crypto-skeptic lawmaker claimed that the Trump family could benefit from World Liberty Financial’s (WLFI) USD1 stablecoin deal with MGX, a firm based in the Arab Gulf States.

The deal comprises a $2 billion investment connected to Binance and WLFI’s stablecoin. Warren stated that the Senate shouldn’t approve the crypto bill “to enable this type of corruption.”

While several Republicans slammed Democrats for putting “partisan politics above policy,” two GOP senators voted against advancing the bill.

The cloture vote on the GENIUS Act failed to reach the 60 votes needed to pass, with 49 senators voting to proceed and 48 voting against it. Only two Republicans, Senators John Boozman and Tom Cotton, voted against advancing the bill, while all 47 Democrats present voted in the negative.

The GENIUS Act would have created a regulatory framework for stablecoins, placing them under the Federal Reserve Rules. The bill would also have required issuers of significant-value stablecoins to maintain minimum capital requirements and be subject to heightened supervision.

The legislation was considered a bipartisan effort to increase regulatory clarity after several Democrats showed support over the past few months. Additionally, the bill went through various amendments to address senators’ concerns, including stricter requirements for stablecoin issuers and Anti-Money Laundergence (AML) provisions.

Despite these efforts, several Democrats expressed concerns about the revised version of the bill on May 3, surprising many lawmakers with their last-minute stance. Among the critics were Senators Richard Blumenthal, Douglas Jones, Jeanne Shaheen, and Raphael Warnock, who had previously supported the bill.

The lawmakers stated that the draft bill lacked critical AML and national security safeguards. They also highlighted ambiguities in the regulations for bank participation and the potential for exploiting workers’ benefits.

“We’re disappointed that we couldn’t complete this legislation. It’s no secret that we’ve had concerns about the bill throughout the process, which is why we engaged in good faith to negotiate amendments that would strengthen the bill and address outstanding issues. Unfortunately, despite our best efforts, we were unable to reach an agreement that would mitigate the serious risks to consumers, investors, and the financial system.”

Among the senators who expressed concerns about the bill, Senator Elizabeth Warren also slammed the Trump family for benefitting from a new stablecoin deal.

In a recent post on May 4, the crypto-skeptic lawmaker stated that the former President’s company, World Liberty Financial (WLFI), is investing $1 billion in a new firm, MGX, which is based in the United Arab Emirates.

The investment will fund the launch of WLFI’s new stablecoin, which will be pegged to the U.S. dollar and bear the company’s name. It will also see Binance, the world’s largest cryptocurrency exchange, investing a further $1 billion in MGX.

According to a report by The Block, which first reported the deal, the total investment package could be as high as $4 billion. The report also noted that the deal will be announced at an event in Washington, D.C., on May 9.

However, Senator Warren expressed concerns about the deal, highlighting that it