Stablecoin legislation delay could be bad for altcoins

Industry experts have warned that altcoins could face headwinds if Congress fails to pass pending stablecoin legislation.

Bitwise CIO Matt Hougan has expressed concern that legislative inertia would particularly impact altcoins. This cautionary outlook comes as the Senate prepares to vote on the GENIUS Act before Memorial Day.

“If stablecoin and market structure bills grind to a halt in DC, it’s going to be a long summer for non-bitcoin crypto assets,” Hougan warns.

The potential stalling of stablecoin legislation creates a tough situation for altcoins. This is due to the fact that they tend to depend largely on stablecoin liquidity and trading pairs.

As much as Bitcoin enjoys institutional adoption and growing acceptance as a strategic asset class, numerous altcoins do not enjoy these buffers against regulatory uncertainty.

Stablecoins are the foundational infrastructure of the altcoin system. They generate trading liquidity, on-ramps from traditional finance, and relatively safe haven during volatility. Regulatory treatment has immediate impacts on how easily capital can enter and exit smaller cap tokens. Without well-established rules for operation and issuance, large financial institutions may delay or abandon plans to enter the field.

The GENIUS Act had initially seen bipartisan support, with the Senate Banking Committee voting 18-6 in its favor. Five Democratic committee members had voted across party lines at that time. But subsequent action has seen nine Democrats, four of whom previously voted for the bill, switch sides.

Altcoin investors should watch for the U.S. Senate vote on May 26. In the absence of the regulatory certainty that a law would provide, institutional investors’ participation in altcoin markets can remain limited.

This leaves such assets more vulnerable to volatility and bearish sentiment if the stablecoin legislation does not advance. Coinbase CEO had also urged the Congress to speed up the Genius act.

Overall crypto outlook still positive despite legislative uncertainty

In spite of legislative uncertainty, the overall cryptocurrency space has registered some positives within the first 100 days of the Trump presidency. A few positive policy initiatives have been implemented.

From establishing a U.S. strategic bitcoin reserve which now contains around 200,000 BTC to the White House recognizing digital assets as a “national priority,” coupled with roll-backs on SEC accounting rules which had shut banks out of participation in cryptocurrencies, the altcoin space has registered a few positives.

If stablecoin and market structure bills grind to a halt in DC, it's going to be a long summer for non-bitcoin crypto assets.

— Matt Hougan (@Matt_Hougan) May 6, 2025

Hougan believes that the majority of crypto assets will reach new all-time highs this year, and Bitcoin could easily surpass $200,000. But he cautioned in his recent report that this is pinning one’s hopes on Washington finally getting its act together regarding crypto regulations.

The actual concern is that what we are seeing today is mainly a result of action by the president and not laws enacted by Congress. If Congress fails to enact the legislation, future presidents are simply going to be able to reverse gains. The stablecoin legislation is an opportunity to put crypto’s rules into law with bipartisan support. That would prevent future presidents from rolling back gains.

For altcoin markets, stablecoin legislation would enable more institutions to participate and provide liquidity to markets. But if legislation does not occur, large financial institutions may still opt out as they prefer clear regulation.