Stablecoin Bill Falls Short of Democrats' Support
The bill’s momentum faded as critics highlighted its potential to legitimise loosely regulated tokens, empower private issuers, and bypass traditional banking safeguards.
The US Senate's GENIUS Act faces opposition from previously supportive Democrats, throwing the future of dollar-pegged stablecoins into uncertainty.
Nine Senate Democrats have abruptly withdrawn support for what was supposed to be landmark legislation establishing the first comprehensive federal framework for stablecoins. The bill would require issuers to maintain 100% reserve backing with liquid assets and implement strict oversight measures.
Despite passing the Senate Banking Committee with an 18-6 vote in March, the GENIUS Act now needs at least seven Democratic votes to reach the crucial 60-vote threshold. The task is suddenly looking daunting with time running short before the August recess.
The reversal came after Senate Minority Leader Chuck Schumer and Senator Elizabeth Warren reportedly rallied Democrats against the bill's current form, citing insufficient protections around anti-money laundering (AML) and national security.
"The bill that was introduced for floor consideration back-pedalled on a lot of the progress we made and did not include other improvements we sought," wrote Senator Ruben Gallego on X, justifying the Democrats' hardening position.
Representative Maxine Waters expressed concern over US President Donald Trump’s affiliated entity launching a stablecoin (USD1). He hinted that Trump-linked crypto ventures could potentially benefit from the legislation.
The Senate bill stands in stark contrast to the House's competing STABLE Act, revealing fundamentally different visions for crypto's future.
Read: How STABLE Is the GENIUS Act?
Key differences include
Reserve requirements (Senate allows money market funds; House demands stricter reserves)
Algorithmic stablecoins (Senate proposes brief study; House wants two-year moratorium)
Regulatory authority (competing oversight mechanisms)
"We have a choice here. Move forward and make any remaining changes needed in a bipartisan way, or show that digital asset and crypto legislation remains a solely Republican issue," Senator Bill Hagerty posted on X, challenging Democrats to return to the negotiating table.
Traditional banking advocates warn the bill creates dangerous "shadow deposits" outside the regulated banking system.
"The Senate stablecoin bill is deeply flawed and poses grave and unacceptable dangers to consumers and the broader financial system," cautioned Arthur Wilmarth, Professor Emeritus of Law, in American Banker.
Meanwhile, crypto exchanges like Coinbase and venture firms like Andreessen Horowitz reportedly lobby against both Senate and House versions, preferring even lighter regulation.
The GENIUS Act's fate reveals a fundamental truth about crypto regulation in 2025: political theatre cannot overcome fundamental economic and security concerns.
With stablecoins now representing a record $242 billion market, the implications extend far beyond Washington politics. DeFi protocols, crypto exchanges, and millions of users rely on these dollar-pegged tokens as the backbone of the entire ecosystem.
For investors, the regulatory uncertainty creates both risk and opportunity. Those positioning for eventual clarity may find current volatility the perfect entry point — if they can stomach the politics.
Until then, the industry remains caught between innovation and regulation, with billions hanging in the balance.