WASHINGTON — Senate Democrats helped clear the way for passage of a landmark cryptocurrency bill on Wednesday as the industry capitalizes on the tens of millions of dollars it spent on congressional elections last year.
The
68-30
vote to advance the bill occurred amid growing scrutiny of President Donald Trump’s various crypto dealings, which have enriched his family and presented unprecedented conflicts of interest for his administration. Eighteen Democrats voted “yea.” A final vote on passage is expected next week.
The legislation, titled the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, would be a first step toward making the scam-riddled cryptocurrency industry part of the U.S. financial system, establishing federal oversight of stablecoins, which have their value connected to another asset, and raising the prospect of future crypto bailouts. The bill was stalled for weeks by demands for changes from senators on both sides of the aisle that were ultimately blocked by GOP leadership.
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To its critics, the bill’s progress shows the power of
$130 million in crypto campaign cash
even as Trump flouts every imaginable standard of good government.
“This bill wouldn’t exist if it weren’t for the crypto lobby,” Sen. Elizabeth Warren (D-Mass.) said. “Why is the industry here asking for regulation? They want the benefits of the gold star, U.S. government oversight without really having significant oversight. And that’s the GENIUS Act.”
Democrats had sought to amend the bill to prohibit the president, vice president, and senior government officials from directly or indirectly profiting from a stablecoin venture while in office. In recent weeks, Trump has generated outrage by
hosting an exclusive dinner with the president
for the top buyers of his personal $TRUMP meme coin, raising corruption, ethics and security concerns. His businesses have
moved to expand investments
in bitcoin while at the same time his administration is working to reduce regulation of the industry and
weaken
enforcement against certain cryptocurrency crimes.
Republicans balked at that provision, however, shielding Trump and forcing Democrats who supported the legislation, some of whom had received significant financial backing from the crypto industry, to back down.
“He’s gonna have to abide by all the ethics rules that anyone else will,” Sen. Ruben Gallego (D-Ariz.) told Trixpoint. “What they want specifically is a carve-out to block him. We could not get that in.”
Gallego’s 2024 Senate campaign was aided by $10 million from super PACs financed by three large crypto companies, including the Coinbase digital currency exchange. The money
financed positive ads
in support of the Arizona Democrat. He’s now one of the strongest advocates of the GENIUS Act in the Senate.
Sen. Adam Schiff (D-Calif.), who benefited from the super PAC spending millions against former Rep. Katie Porter (D-Calif.) in a primary, is also a leading advocate. So is Sen. Kirsten Gillibrand (D-N.Y.), who is chairing the Democratic Senatorial Campaign Committee this cycle.
Other Democrats who backed the GENIUS Act said their support for the measure had nothing to do with the crypto industry’s massive 2024 campaign spending.
“I got no help from the crypto industry,” said Sen. Andy Kim (D-N.J.). “I have had no real engagements with that industry, on any political side, you know, I’m just trying to think through this problem that we have right now, which is that, North Korea right now, and cartels and terrorist groups, they are already exploiting this technology for billions of dollars worth of illicit financing, and I want to stop that. So that’s, you know, that’s something that we’re going to try to do.”
Unlike Gallego, who hails from a battleground state, however, Kim had less need for similar backup since he was elected to a safe seat in reliably blue New Jersey.
Warren and other critics of the bill said not only was voting for it tantamount to endorsing Trump’s corruption in office, but that it would weaken financial stability. The bill’s haters and supporters agree it would turbocharge the market for stablecoins by putting stablecoin issuers under the supervision of bank regulators.
Warren compared their tactics to banks
who lobbied
Congress in 2000 for regulations that ultimately let derivatives markets run wild, contributing to the Great Recession. Like the derivatives lobbyists a quarter-century ago, crypto advocates say legislation is needed to protect financial “innovation” and to keep the innovators on American shores.
Under the legislation, companies that issue stablecoins — and pretty much any company could obtain permission to do so — would be required to maintain certain levels of reserves, like a bank does, to prevent panics among stablecoin holders, like what happened in 2022 when the stablecoin Terra lost its “peg” to the value of the U.S. dollar. Democrats pushed for stricter rules for what kinds of assets could count as reserves.
One controversial provision of the bill addresses what would happen if a stablecoin issuer goes bankrupt. Part of the section puts stablecoin holders ahead of other claims in terms of gets paid first, potentially including bank depositors whose deposits are insured by the federal government.
“It’s a way to make sure that U.S. taxpayers bail out any stablecoin shortfalls,” said Warren, an expert on bankruptcy law. “The provision puts people holding stablecoins ahead of depositors in banks. The federal government won’t let those depositors fail, which means the stablecoin guys get theirs first.”
The main argument for the legislation from its Democratic supporters is that people are already buying and selling stablecoins in what has been a legal gray area. When Trump returned to the White House in January, he essentially called off efforts by the Securities and Exchange Commission to enforce securities laws against the crypto industry.
“Many constituents of mine and of others already have money in stablecoin and there are no rules,” Sen. Ben Ray Luján (D-N.M.) told Trixpoint. “There should be rules surrounding this to ensure constituents have rules surrounding them.”
