Democratic lawmakers in Washington are backing off support for crypto legislation

Democratic lawmakers in Washington are pulling back support for crypto legislation amid heightened concerns over corruption, including the activities of the Trump family’s World Liberty Financial (WLFI).

In March, the GENIUS Act, which would regulate stablecoins in the US, passed a critical committee reading with the support of several pro-crypto Democrats. Democratic Senators Ruben Gallego, Mark Warner, Lisa Blunt Rochester, Andy Kim and Angela Alsobrooks voted with Republicans, voting against lead Democrat and prominent crypto critic Senator Elizabeth Warren.

The bill passed the committee only after a number of changes were made, including stricter requirements for stablecoin issuers and provisions for Anti-Money Laundering, countering terrorism financing and risk management procedures.

Now, it seems that even those provisions are insufficient to quell Democratic concerns. Following some high-profile crypto deals that personally enrich President Donald Trump, Congressional Democrats are pulling their support.

Bipartisan efforts on stablecoin bills endangered

Of the five pro-crypto Democrats to pass the GENIUS Act in the Senate Banking Committee, four signed their names to a statement on May 3, saying that they do not feel comfortable with the direction stablecoin legislation is taking.

“The bill as it currently stands still has numerous issues that must be addressed, including adding stronger provisions on anti-money laundering, foreign issuers, national security, preserving the safety and soundness of our financial system, and accountability,” the announcement reads.

The statement does not explicitly call out corruption nor mention Trump by name, but taken alongside other measures from Democratic lawmakers, it shows a growing reticence to engage on cryptocurrency issues.

As Cointelegraph reported on May 5, Representative Maxine Waters and other Democratic members of the House Financial Services Committee plan to leave a House of Representatives hearing on crypto titled “American Innovation and the Future of Digital Assets.”

This would sink the hearing, which is scheduled for May 6 and concerns a draft bill that would change how US financial regulators, namely the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), treat cryptocurrencies. The bill was announced by Representative French Hill and other top Republicans on May 5.

According to a staffer familiar with the matter, House rules require all committee members to be present.

Waters, who has previously called for bipartisan cooperation on crypto legislation, has harshly criticized Trump, specifically his WLFI crypto investment firm. She characterized his TRUMP memecoin, released on his inauguration, as “the worst of crypto” and has been particularly vocal about the WLFI USD1 stablecoin project.

At a markup hearing on April 2 concerning the STABLE Act — a draft bill circulating the House regarding stablecoins — Waters said the bill, in its current form, allows the president and insiders to “enrich themselves at the expense of everyone else.”

“If there is no effort to block the President of the United States of America from having his stablecoin business [...] I will never be able to agree on supporting this bill, and I would ask other members not to be enablers,” said Waters.

Even Hill, a Republican leading the charge for crypto in Washington, said that Trump’s crypto projects complicate Congress’ ability to pass legislation.

Stablecoin support as political leverage

Corruption concerns may be one factor behind Democrats pumping the brakes on bipartisan crypto laws, but some observers believe it could be more of a political ploy.

Aaron Brogan, a lawyer specializing in regulatory issues in the cryptocurrency industry, said it’s “unlikely that this group of Senators suddenly came to their senses and realized that the mostly benign stablecoin bill they had previously supported lacked protections they refused to name.”

Brogan suggested that either lawmakers wanted to use support for the bill as leverage — Senate Majority Leader Chuck Schumer has reportedly urged Democratic lawmakers in private not to commit to the bill for this very reason — or an influential donor wants to kill the bill or use it as leverage.

Pointing to Protect Progress, a major political action committee supporting crypto that donated millions to Gallego’s campaign, Brogan added that it is possible that major donors to the committee (i.e., Coinbase) would rather see the bill replaced with something more to their liking.

While he said it’s impossible to know for sure, “Coinbase has attempted to bundle the pending market structure legislation with stablecoins to make it more likely to pass.”

Shady dealings by Trump's firm, World Liberty Financial

After scoring an estimated $550 million from Trump token sales and sealing more deals that will enrich its founders and board members — many of whom are Trump family members — WLFI has faced backlash over its dealings and corruption.

One of them, Eric Trump, announced on May 1 that Abu Dhabi-based investment firm MGX would use USD1 to settle its $2-billion investment in global crypto exchange Binance.

At Token2049, Eric Trump praised the UAE for its crypto-friendly approach, saying that the regulation-heavy EU is a “lost cause.”

In November